1. 1. WHAT IS NATURAL RESOURCE ECONOMICS & WHY IS IT IMPORTANT?

2. Key Terms Natural Resources Economics
Specific attributes of the environment that are valued or have proven useful to humans [or have the potential to do so]* --G. Johnston
Aspects of nature that can be used by humans to satisfy human wants--Hite & Mulkey
key to human use: technology, time, accessibility, appli-cation, perception; conflicts often related to culture
Economics
the study of the production, processing, distribution, consumption of goods/services in an exchange system

3. Key Terms (cont) Natural Resource Economics
application of economics to manage naturally occurring resources for human needs/wants with efficiency as the primary goal
efficiency may be defined in market or nonmarket terms, focused on the short or long run, relative to current or future generations, local or global in scope
decision choices include maintaining the status quo, altering the status quo, or doing nothing with focus on relevant institutions
evaluation always includes the costs & benefits of a decision & to whom those costs & benefits accrue

4. Key Terms (cont)
Environmental Economics vs. Natural Resources Economics (Hackett)
Environmental Economics: economic basis for pollution problems & policy alternatives
Natural Resources Economics: problems of managing common-pool* natural resources, determining optimal rates of extraction, & understanding resource markets
*common-pool natural resources: difficult to exclude access, but once extracted is no longer available to others (groundwater, rivers, fisheries, public forests)
Scarcity, Opportunity cost, economic rationality

5. Why Study Natural Resource Economics?
Natural Sciences lack commonly accepted decision process
Economics may “assume” the problem away
Irreversibility
Market failure
Joint importance of economic and ecological systems
Physical-Natural-Economic System Links
Improves efficient functioning of system
Improves understanding about the world we live in
Summary: Improved management of natural resources, whether for private, public or natural gain

6. Classification of Natural Resources
FLOW
RESOURCES
FUND
RESOURCES
NONSTORABLE
RESOURCES
(ENVIRONMENTAL
RESOURCES)
RENEWABLE
RESOURCES
NONRENEWABLE
RESOURCES
STORABLE
RESOURCES
RECYCLABLE
RESOURCES
NONRECYCLABLE
RESOURCES

7. Classification of Resources (continued)
1. Flow Resources (nondepletable)
a. Nonstorable (sometimes called “environmental resources”)
Often indivisible
Inexhaustible (in human span of time)
Time & management relevant only to consumption, not supply

8. Nonstorable Flow Resources
Scenic
Views
Ocean
Waves
Sunshine
“Weather”
Ecosystems

9. Classification of Resources (cont)
1. Flow Resources (cont)
Storable (by nature, as in living matter; by humans with technology)
May be divisible
Time & management relevant to both to consumption & supply
The services are what are significant for humans

10. Storable Flow Resources
Geothermal Energy
Wind
Wave Energy
Solar
Hydro
Power
Water
Hydrogen Energy

11. Classification (cont.)
2. Fund Resources (stock or depletable resources)
a. Exhaustible & Renewable
Regenerative within human use time frame
Assumes use within minimum & maximum thresholds

12. Exhaustible & Renewable Fund Resources
Timber
& Crops
Fish
Animals
(human &
nonhuman
Soil & Water
Quality
Grazing
Lands
Forests & some
Unique ecosystems

13. Classification (cont.)
2. Fund Resources (cont)
b. Exhaustible & Nonrenewable
Relatively fixed stocks/fund within human use time frame
(1) Nonrecyclable--Examples: fossil-fuel energy resources (oil, natural gas, coal, peat, many “renewable” resources when thresholds violated)
(2) Recyclable--Examples: some minerals (iron, aluminum, gold, silver)

14. Framing Natural Resource Issues
Quantity & Quality of: Land, Water, Air, Energy
Public vs. Private Management Question
Trend of Magnitude of Problem:
Persistent, Chronic, Cyclical, Declining, Growing?
Irreversibility
Geographic scope
Whose problem & who decides (ethics)?
Property rights
Time (short vs. long run; current vs. future generations)

15. Optimism vs. Concern for Environment & Natural Resources
Concerns
Global warming & climate impacts
Over-population & biodiversity
Soil/water quality/Mineral/energy cost/availability
Pollution/resource shortage impacts on social & political institutions