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1. WHAT IS NATURAL RESOURCE ECONOMICS & WHY IS IT IMPORTANT? AGEC 3503 SPRING 2006. Larry D. Sanders. Dept. of Ag Economics Oklahoma State University. INTRODUCTION. Purpose: to understand the concept of natural resource economics and its relevance Learning Objectives:

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1 what is natural resource economics why is it important agec 3503 spring 2006

1. WHAT IS NATURAL RESOURCE ECONOMICS & WHY IS IT IMPORTANT?AGEC 3503SPRING 2006

Larry D. Sanders

Dept. of Ag Economics Oklahoma State University

introduction
INTRODUCTION
  • Purpose:
    • to understand the concept of natural resource economics and its relevance
  • Learning Objectives:

1. Introduce the course & how it is to be administered

2. Define key terms.

3. Understand the purpose of studying environmental & natural resource economics.

4. Understand the classification of resources.

introduction3
INTRODUCTION
  • Natural Resource Economics Syllabus
    • Purpose
    • Evaluation
    • Schedule
  • Importance of Student Activity
instructor philosophy
Instructor/Philosophy
  • Personal/Professional Background
  • Teaching Philosophy
  • Student Info
anxiety test
“Anxiety Test”
  • “The ultimate test of a set of economic ideas. . . is whether it illuminates the anxieties of the time. Does it explain problems that people find urgent? Does it bear on the current criticism of economic performance? . . . Does it bear upon the issues of political debate? For these, though many have always preferred to believe otherwise, do not ignite spontaneously or emerge maliciously from the mouths of agitators to afflict the comfortable.”

--John Kenneth Galbraith, Economics & the Public Purpose, 1973 [bold italics added by instructor]

where to get more information
Where to get more information
  • Syllabus
  • Sources
    • Hackett
    • ERS-USDA AH722
    • Handouts
    • Supplementary Readings
    • Govt. Documents--Library
    • Congress, Legislature, St/Fed Agencies
    • Electronic sources (note biased vs. objective sources)
    • “Experts”
team exercise
Team Exercise
  • Instructor assigns teams
  • Each team identify top 3 natural resource/environmental issues in 5 years
  • Be prepared to briefly explain each issue
key terms
Key Terms
  • Natural Resources
    • 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
key terms cont
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
key terms cont10
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
special break for cartoon
Special: Break for cartoon!
  • Sometimes some folks go to extremes to get our attention!
why study natural resource economics
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
classification of natural resources
Classification of Natural Resources

NATURAL RESOURCES

FLOW

RESOURCES

FUND

RESOURCES

NONSTORABLE

RESOURCES

(ENVIRONMENTAL

RESOURCES)

RENEWABLE

RESOURCES

NONRENEWABLE

RESOURCES

STORABLE

RESOURCES

RECYCLABLE

RESOURCES

NONRECYCLABLE

RESOURCES

classification of resources continued
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
nonstorable flow resources
Nonstorable Flow Resources

Scenic

Views

Ocean

Waves

Sunshine

“Weather”

Ecosystems

classification of resources cont
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
storable flow resources
Storable Flow Resources

Geothermal Energy

Wind

Wave Energy

Solar

Hydro

Power

Water

Hydrogen Energy

classification cont
Classification (cont.)

2. Fund Resources (stock or depletable resources)

a. Exhaustible & Renewable

  • Regenerative within human use time frame
  • Assumes use within minimum & maximum thresholds
exhaustible renewable fund resources
Exhaustible & Renewable Fund Resources

Timber

& Crops

Fish

Animals

(human &

nonhuman

Soil & Water

Quality

Grazing

Lands

Forests & some

Unique ecosystems

classification cont20
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)

natural resource examples
Natural Resource Examples

FLOW RESOURCESFUND RESOURCE

NONSTORABLE STORABLERENEWABLENONRENEWABLE

nonrecyc.recyclable

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

framing natural resource issues
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)
optimism vs concern for environment natural resources
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
  • Optimism
    • Legislative progress
    • Toxic release rates down
    • US competitiveness
references for lesson 1
References for Lesson 1

Hackett text

Hite, J.C., & W. D. Mulkey. Natural Resource Economics : An Introductory Textbook, draft unpublished text.

Johnston, G.M., D. Freshwater & P. Favero (editors). Natural Resource and Environmental Policy Analysis: Cases in Applied Economics, Westview Press, Boulder, 1988.

Kahn, J.R. The Economic Approach to Environmental and Natural Resources, second edition, 1998.

Sanders, various notes

l1 homework
L1: Homework
  • Read Ch. 1, Hackett (10-12 Jan)
  • Do Problem #1, p. 16 (12 Jan) –5 points
  • Refer to “Internet Links” (12 Jan) –5 points
    • Select 2 links
    • Briefly review, including
      • Content
      • Bias or objectivity
      • Likely use of material