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Generalized Resource Scarcity

This resource provides insights into indicators of scarcity, such as physical indicators and resource prices, and explores factors mitigating scarcity, including exploration and discovery, technological progress, and substitution. It also discusses the concepts of scarcity rent, marginal discovery cost, and marginal extraction cost. Learn how these indicators and factors can help anticipate and compare scarcity across different resources.

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Generalized Resource Scarcity

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  1. Generalized Resource Scarcity Monday, April 26

  2. Indicators of Scarcity • Physical indicators • Resource prices • Scarcity rent • Marginal discovery cost • Marginal extraction cost

  3. A good indicator of scarcity: • Provides foresight • Anticipate, not just report • Provides comparability • Indicate relative scarcity of different resources • Indicate which scarcity is more problematic • Offers computability • Uses readily available or easily obtainable data for calculations

  4. Issues for indicators of scarcity: • Physical indicators • Foresight • Comparability • Computability • Resource prices • Foresight • Comparability • Computability

  5. The Bet • Biologist Paul Ehrlich and economist Julian Simon • $200 investment • Copper, chrome, nickel, tin and tungsten

  6. Issues for indicators of scarcity: • Scarcity rent • Foresight • Comparability • Computability • Marginal discovery cost • Foresight • Comparability • Computability

  7. Issues for indicators of scarcity: • Marginal extraction cost • Foresight • Comparability • Computability

  8. Factors Mitigating Scarcity • Exploration and Discovery • Search for more of a resource until the marginal discovery cost of an additional unit equals the marginal user cost (marginal rent) of the unit $ MEC+MUC P At q1, MUC = P - MEC MEC D q1 Q

  9. Factors Mitigating Scarcity • Technological Progress • Lower cost of extraction • More productive processes $ MEC+MUC P MEC D Q

  10. Factors Mitigating Scarcity • Substitution • Substitute abundant resources for scarce ones

  11. Possibilities for Input Substitution X Fixed-proportion isoquant Q1= one (edible) 8” pie crust X = flour Y = shortening F1, Q1 Y

  12. X F2, Q2 Fixed-proportion isoquants Q2= two (edible) 8” pie crusts X = flour Y = shortening F1, Q1 Y

  13. Fixed-proportion production functions: X If availability of resource X declines, then the availability of Q necessarily declines. F1, Q1 F2, Q2 Substitution is not an option for retaining same level of Q. Y

  14. X S1, Q1 Q1= one pint of salad dressing X = oil Y = vinegar Y

  15. Substitutability in production: X If the availability of resource X declines, the availability of Q may not be affected. S1, Q1 Substitution of Y for X may allow for retaining same level of Q. Y

  16. Film: Dodging Malthus

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