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The Economics of Nature and the Nature of Economics

Edited by Cutler J. Cleveland, David I. Stern and Robert Costanza

This book discusses important recent developments in the theory, concepts and empirical applications of ecological economics and sustainable development. The editors have assembled a fascinating collection of papers from some of the leading scholars in the field of ecological economics.
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Chapter 10: Natural resource scarcity indicators: an ecologicl economic synthesis

Cutler J. Cleveland and David I. Stern


Cleveland 03 chap 8 2/4/02 7:32 am Page 238 10. Natural resource scarcity indicators: an ecological economic synthesis Cutler J. Cleveland and David I. Stern INTRODUCTION In this chapter we review the literature on natural resource scarcity indicators, develop a synthesis based on the ideas of the institutionalist economist John Commons, and a method of decomposing a generalized unit cost indicator into more fundamental determinants of natural resource productivity. This generalized unit cost indicator is compared to alternative indicators using data from the US agricultural sector. Our thesis is that the various approaches to measuring natural resource scarcity are complementary, not contradictory. However, they represent a starting point rather than an endpoint in the investigation of resource scarcity. Hence our decomposition methodology. An increase in natural resource scarcity is defined as a reduction in economic wellbeing due to a decline in the quality, availability or productivity of natural resources. Simple in concept, the measurement of natural resource scarcity is the subject of significant debate about which of the alternative indicators of scarcity, such as unit costs, prices, rents, elasticities of substitution and energy costs, is superior (for example, Brown and Field, 1979; Fisher, 1979; Hall and Hall, 1984; Cairns, 1990; Cleveland and Stern, 1993). Most neoclassical economists argue that, in theory, price is the ideal measure of scarcity (for example, Fisher, 1979) though some argue in favour of rents (Brown and Field, 1979; Farzin, 1995). Barnett and Morse (1963) developed the unit cost indicator from their reading of Ricardo...

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