1. Natural Resources and Their Use Monday, January 23

2. Institutions Social devices that define the rights and obligations of participants in a decision process. Market institutions Government institutions NOT agencies, business firms or schools

3. Contrast: Resource Development Resource Conservation Resource Preservation Ecosystem Management

4. Contrast: Extractive vs. non-extractive use Use value Non-use value Existence Option Bequest

5. Natural Resource Something that is useful and valuable in the condition in which we find it (Randall) Naturally occurring resources and systems that are useful to humans or could be under plausible technological, economic and social circumstances (Howe)

6. Natural Resource Taxonomy Nonrenewable resource Recyclable resource Renewable resource

7. Nonrenewable (Depletable) Resource Rate of replenishment for these resources is so low that there is no augmentation of the stock within a reasonable planning horizon Challenge is to allocate dwindling stock among generations while meeting the ultimate transition to renewable resources

8. Current Reserves Known reserves that can be profitably extracted at current prices Quantity can be expressed as a number

9. Potential Reserves Quantity is a function of prices Costs of extraction Demand If recovery costs go down, quantity goes up If demand (and market prices) goes up, quantity goes up

10. Recyclable Resource Exists in a form allowing its mass to be recovered once its current use is no longer desirable Extent of recycling depends upon economic conditions Cannot achieve 100% recovery

11. Renewable Resource Natural replenishment augments the flow at a non-negligible rate Some can be stored, some cannot Some can be exhausted/depleted Challenge is to maintain an efficient sustainable flow of the resource

12. Modeling Natural Resource Use S 1 = S 0 – Q 0 + ΔS Stock Flow Subscript for time; t=0 is current or first time period

13. Nonrenewable Resource For current reserves ΔS = 0 S 1 = S 0 – Q 0 For potential reserves ΔS > 0 if demand (price increase) or technology (cost decrease) change Exploration and development

14. Recyclable resources S 1 = S 0 – Q 0 + αQ 0 α < 1

15. Renewable Resources Replenishment but no accumulation S 1 = ΔS Replenishment and accumulation/storage ΔS > 0

16. Groundwater – a special case Recharge ΔS > 0 Mining ΔS = 0 Q t > ΔS

17. Political Unit Problem When evaluating resource management decisions, what boundaries do we use? Global, international, national, state, regional, local Whose interests count? “Accounting stance”

18. Assignment for Wednesday: Read Field, chapter 5 “Efficiency and Sustainability”