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ECONOMICS 8535

Seminar in Natural Resource Economics Fall, 1995

Professor Chuck Howe

"In economic terms, the belief seems to be that natural resources are scarce; that the scarcity increases with time; and that resource scarcity impairs levels of living and economic growth ••• But in our view, these propositions are neither self-evident nor easy to formulate in meaningful terms." (Barnett & Morse, p. 49).

"For if growth and welfare are inescapably subject to an economic law of diminishing returns, the necessary social policies and the moral and human implications are surely different than if they are not." (Barnett & Morse, p. 3).

Concern with natural resource scarcity existed before the industrial revolution, mainly in connection with the cutting of forests and the consequent shortage of building materials and fuel. Technological change of many forms has helped avert serious shortages, but the environmental consequences of resource exploitation have become the major problem. Problems have become global in scope, from global warming to global exhaustion of marine fish stocks.

In this seminar, we will trace some of this history, addressing the nature & measurement of natural resource scarcity and its consequences for society. To a large degree, natural resource economics is about "sustainability", a current buzz word involving stretching the use of our resources and finding ways of protecting the potential well being of future generations. Any serious study of sustainability must involve various disciplines. Economics is only a part of the needed analytical apparatus.

This is a Ph.D. level seminar. The purpose of 8000-level seminars is to investigate current and even frontier topics in the field. Another major purpose here at C. U. is to provide an opportunity for the Ph.D. candidate to try a research topic that could serve as a Ph.D. dissertation. All participants are urged to look upon their research paper in this way-­as a likely start on their dissertation. Grading in the seminar--especially on the research paper--will be based on those assumptions.

There will be a comprehensive final exam on the topics below, counting 40 % of the grade . . The research paper will count 40 % of the grade, and class participation 20 % . Class participation, based on adequate preparation, is important and is expected. Selection of research topic must be discussed with and approved by Professor Howe. Timing of selection of a research topic poses a dilemma: one would like to know everything before committing to a topic, but a quality paper cannot be researched and written in 2 or 3 weeks. It is assumed that you have some background and deep interest in this field, perhaps some deeply felt conservation issue. Topics should be selected by mid-semester and papers completed

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before classes end. Ea.ch class member will give an oral report on their paper to the class. Teams of class members will also make class presentations on selected topics in the outline below.

Text materials are found in 2 identical packets of readings on reserve in the Geological Sciences Library .. 2 hour plus overnight reserve.

Classics in the field:

Barnett, Harold J. and Chandler Morse, 1963, Scarcity and Growth: The Economics Qf Natural Resources Availability, Baltimore: Johns Hopkins University Press.

Ciciacy-Wantrup, S. V.,1976, Resource Conservation: Economics and Policies, Division of Agricultural Sciences, Agricultural Experiment Station, University of Califomia­Berkeley, 3rd Edition, 4th printing.

Hays, Samuel P., 1959, Conservation and the Gospel of Efficiency: The Progressive Conservation Movement; 1890-1920, Harvard University Press.

Scott, Anthony, 1983, Natural Resources: The Economics Qf Conservation, Ottawa: Carleton University Press.

Page, Talbot, 1977, Conservation anQ Economic Efficiency, Baltimore: Published for Resources for the Future by the Johns Hopkins University Press.

Howe, Charles W. , 1979 Natural Resource Economics, New York: John Wiley & Sons. Krutilla, John V. (ed), 1972, Natural Environments: Studies in Theoretical and

Applied Analysis, Baltimore: Published for Resources for the Future, Inc. by the John Hopkins University Press.

Maler, Karl-Goran, 1974, Environmental Economics: A Theoretical Inquiry, Baltimore: Published for Resources for the Future, Inc. by the John Hopkins University Press.

Fisher, Anthony C., 1981, Resource and Environmental Economics, Cambridge: Cambridge University Press.

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Useful References:

Clark, Colin W., 1976, Mathematical Bioeconomics: The Optimal Management of Renewable Resources, Wiley-Interscience.

Conrad, Jon M. and Colin Clark, 1987, Natural Resources Economics: Notes & Problems, Cambridge University Press.

Dasgupta, P. S. and G. M. Heal, 1979, Economic Theory and Exhaustible Resources, Cambridge University Press.

Kneese, Allen V. and James L. Sweeney, 1985, Handbook of Natural Resource and Energy Economics, Vols. I-Ill, Amsterdam-New York: North-Holland Press.

Krutilla, John V. and Anthony Fisher, 1975, The Economics of Natural Environments, Johns Hopkins University Press.

Smith, V. Kerry (ed.), 1979, Scarcity .and Growth Reconsidered, Resources for the Future by Johns Hopkins University Press.

Smith and Krutilla (eds.), 1982, Explorations in Natural Resource Economics, Johns Hopkins University Press.

Archibugi and Nijkamp, 1989, Economy .and Ecology: Towards Sustainable Development. Dordrecht: Kluwer Academic Publishers.

Data Sources:

Landsberg, Hans H., Leonard Fishman, and Joseph L. Fisher, Resources in America's Future, 1960-2000, Johns Hopkins University Press, 1963 (statistics).

Manthy, Robert S., Natural Resource Commodities: A Century of Statistics: Prices. Outl)ut, Consumption. Foreign Trade, and Employment in~ United States. 1970-lm, Johns Hopkins University Press, 1978 (an update of Trends in Natural Resource Commodities by Potter and Christy, 1962).

M~ior Journals in the Field:

Journal of Environmental Economics and Management (JEEM), Academic Press, USA.

Environmental and Resource Economics, Kluwer, USA and The Netherlands.

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Natural Resources Journal, The University of New Mexico School of Law.

Land Economics, University of Wisconsin.

American Journal of Agricultural Economics

Water Resources Research, American Geophysical Union.

International Journal of Water Resources Development, Butterworth, USA and UK.

Resources and Energy, North Holland.

Natural Resource Modeling, Rocky Mountain Math Consortium, Arizona State University.

Ecological Economics, Elsevier Science Publishers, The Netherlands.

Natural Resources Forum (A United Nations Journal), Butterworth,· USA and UK.

Energy Economics, Butterworth, USA and UK.

Resources Policy, Butterworth, USA and UK.

Beginning and Intermediate Level Texts:

Hartwick, John M. and Nancy D. Olewiler, 1986, The Economics of Natural Resource Use, Harper & Row.

Tietenberg, Tom, 1988, Environmental and Resource Economics, 3rd edition, Scott, Foresman and Co.

Kahn, James R., 1995, The Economic Approach to Environmental and Natural Resources, Fort Worth: The Dryden Press/Harcourt Brace College Publishers.

General Bibliography on Natural Resources and Environment:

The reading packet contains an excellent taxonomy of issues in the NR/E area with corresponding bibliography. This was assembled by Porter Hoagland (Woods Hole) and Rob Stavins (The Kennedy School; Harvard). It is recommended that you copy this for your professional files.

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Topic 1:

Topic 2:

Topic 3:

Course Outline .ang Readings

Background & the History of Natural Resource Concern

a. Overview & Natural Resource Production. Howe 1, 2.

b. History of Natural Resource Concern. Howe 3.

c. Factors Mitigating NR Scarcity Howe 7, Rosenberg

Models & Measures of Natural Resource Scarcity

a. Technical, Economic & Legal Considerations. Howe, "Environment & Primary Activities

b. The Hotelling Model: Introduction Howe, Notes and Problems 1 and 2. Devarajan & Fisher Solow, "The Economics of Resources or the Resources of Economics"

c . Measures of Scarcity. Fisher, 1982. Slade, 1982. Ahrens & Sharma, 1995. Norgaard et al (3 articles) Slade, 1988.

Dynamics of Renewable Resources.

a. Howe: Notes on basic fisheries model. b. Vernon Smith: "Economics of Production from

Natural Resources" . c. Howe, Chap. 11, "Economics of Forest Management". d. Hyde, "Timber Economics in the Rockies: Efficiency &

Management Options". e. Howe, Chap. 14, "Water Resource Systems" f. Howe, "Water Marketing in the Western United

States . .. . ". g. Scheraga, "Energy & the Environment".

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Topic 4: Issues in Sustainability.

a. Property Rights.

i) Demsetz, "Towards A Theory of Property Rights" ii) Randall, "Property Rights, Efficiency & the

Distribution of Income" iii) Howe & Salles, "Modifying Appropriations Doctrine

to Protect Public Values" (in progress) iv) Howe, Chap. 12, "Common Property Resources . . .. "

b. Conservation, Markets & Sustainability.

i) Krutilla, "Conservation Reconsidered" ii) Johnson & Libecap," Efficient Markets and Great

Lakes Timber ... "

c. Sustainability: Theory & Practice.

i) Hartwick, "Intergenerational Equity and the Investing of Rents from Exhaustible Resources"

ii) Toman, Pezzey & Krautkraemer, "Neoclassical Economic Growth Theory & Sustainability"

iii) Howe, "Intergenerational Equity, Sustainability & Economic Efficiency: New Paradigms and Old ·Prescriptons"

iv) Kennedy, "Rethinking Sustainability" v) Solow, Polasky & Broadus, "On the Measurement of

Biological Diversity" vi) Brown & Goldstein, "A Model for Valuing Endangered

Species"

d. Global Warming, Green Accounts, and Natural Hazards

i) Schelling, "Some Economics of Global Warming" ii) Repetto, "Balance Sheet: Incorporating Natural

Resources in Natural Income Accounts" iii) Arvan & Nickerson, "Public Insurance Programs,

Disaster Relief and Optimal Government Policy: A Samaritan's Dilemma Game" .

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