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A Handbook of Industrial Ecology

Edited by Robert U. Ayres and Leslie W. Ayres

Industrial ecology is coming of age and this superb book brings together leading scholars to present a state-of-the-art overviews of the subject. Each part of the book comprehensively covers the following issues in a systematic style: the goals and achievements of industrial ecology and the history of the field; methodology, covering the main approaches to analysis and assessment; economics and industrial ecology; industrial ecology at the national/regional level; industrial ecology at the sectoral/materials level; and applications and policy implications.
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Chapter 19: Optimal resource extraction

Matthias Ruth


Matthias Ruth THE ECONOMICS OF RESOURCE USE Economics has traditionally concerned itself with ‘the best use of scarce means for given ends’ (Robbins 1932). Typically, the ‘ends’ are considered to be achieved when consumers realize maximum possible satisfaction – ‘maximum utility’ – from the consumption of goods and services. The economy helps realize maximum utility in a three-step procedure. First, resources are extracted and transformed into goods and services. Second, producers supply goods and services to consumers for final use. Finally, wastes from production and consumption are recycled in, or removed from, the economic system. Typically, market mechanisms are assumed to reconcile the independent decisions of producers and consumers, and to result in a final coherent state of balance between demand for goods and services and supply. This state of balance for an economy is known as a general economic equilibrium (Walras 1954 [1874], 1969). Given the knowledge about consumers’ preferences, resource endowments, technologies and market forms, economists can compute the prices and quantities of goods and services that are consistent with economic equilibrium. The equilibrium state can then be used as a reference against which to compare the impacts of alternative actions, such as government interventions in markets, on prices and quantities of goods and services, and the subsequent welfare effects for the economy (Arrow and Hahn 1971). Instead of dealing with the simultaneous choice of all producers and consumers in an economy, this chapter concentrates on economic models dealing with the optimal extraction of natural resources. The models are,...

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