Chapter 5: Natural Resource Prices and Natural Resource Scarcity
5. Natural resource prices and natural resource scarcity INTRODUCTION Over the last 30 years there has been considerable debate as to what constitutes the most appropriate indicator of natural resource scarcity. The debate is not only the consequence of incomplete and imperfect data (Brown and Field, 1979; Cleveland and Stern, 2001), it is the upshot of a continuing disagreement about what is meant by resource scarcity and what its potential implications are for human well-being (Barnett, 1979; Smith and Krutilla, 1979; Smith, 1980; Slade, 1982; Hall and Hall, 1984; Mueller and Gorin, 1985; Cairns, 1990; Cleveland, 1991; Farzin, 1995; Ruth, 1995b). Ecological economists believe that much of the debate has been complicated by the lack of understanding of a number of key aspects. These include: (a) the physical properties of natural resources; (b) the role played by natural resources in the economic process; and (c) the diﬀerence between the eﬃcient allocation of natural resources and the sustainable rate of natural resource use. While the debates surrounding the ﬁrst two aspects are well known to most economists, although not always properly understood, the debate surrounding the latter is not. The reason for this stems from the general belief that the sustainability problem can be adequately resolved by dealing with the allocation problem alone. ‘Get the prices right’, most economists say, and a sustainable rate of resource use is achieved along with allocative eﬃciency. Ecological economists strongly refute this in the same way most economists refute the suggestion that...
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