4 - Resource scarcity: are resources limits to growth?

Summary

Introduction

It is probably fair to say that the question in the title has triggered much of the recent interest in natural resources by economists and others. In Chapters 2 and 3 we derived conditions that must be satisfied by optimal programs of resource use under different market or institutional arrangements. We were specially interested in the relationship between market-determined use and socially efficient use. This chapter concerns the evidence on actual rates of use, to date, as well as future prospects. In short: Are we running out of resources? And does it matter?

A conventional view (or, at least, one we often hear expressed) is that the questions are meaningless, because they have no policy implications. The U.S. economy might, according to this view, be facing greatly depleted stocks of some resources, much higher resource costs and prices, and a consequent slowing of growth; yet no intervention by government would be warranted in the absence of clearly demonstrated market failure.

My own view is somewhat different. If, as discussed in Chapter 2, the welfare of future generations is a public good, members of the present generation might be made better off by government intervention to promote conservation and reduce the anticipated drag on growth. For that matter, the government might intervene to promote intergenerational equity even if the market were allocating resources efficiently from the standpoint of the present generation. We certainly do not need to resolve these issues here.