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The Nature of Natural Resources NEEDS REVISION

The Nature of Natural Resources NEEDS REVISION. Announcement. A6 will be due a week from next Tuesday.

roary-kirk
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The Nature of Natural Resources NEEDS REVISION

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  1. The Nature of Natural ResourcesNEEDS REVISION

  2. Announcement • A6 will be due a week from next Tuesday

  3. __________ is a legal principle that when enforced allows an owner to prevent others from using his or her asset. __________ is an inherent characteristic of certain resources whereby consumption or use by one person reduces the amount available for everyone else. • A. Supply, Demand • B. Rivalness, Excludability • C. Privacy, Excludability • D. Rivalness, Privacy • E. Excludability, Rivalness

  4. What are the scarce resources? Where do all raw materials come from? What is required in addition to raw materials?

  5. Laws of thermodynamics First law imposes constraint on total size of economic system Can’t make something from nothing Only something available is the resources provided by nature

  6. Laws of thermodynamics Second law tells us that things fall apart. All production requires low entropy, and creates high entropy waste Is this true in ecosystems? Low entropy must be divided between maintenance of natural capital and human made (built) capital Finite stock of accumulated low entropy Solar energy is ultimate limit on physical size of the economy

  7. How much solar energy is captured in the entire United States (what is Net Primary Production?)

  8. Fourth law of thermodynamics Matter is subject to entropy Controversial in theory Somewhat realistic in applications 100% recycling probably impossible

  9. BUT… If all matter/energy moves towards greater disorder, less usefulness, how do we explain life? Doesn't information substitute for natural resources? NYT Headlines: Data Barns in a Farm Town, Gobbling Power and Flexing Muscle Power, Pollution and the Internet

  10. The ultimate scarce resource is low entropy matter/energy Conclusion:

  11. Low entropy resources provided by nature Abiotic resources Fossil fuels Minerals Water Land Solar power Biotic resources Ecosystem goods Ecosystem services Waste absorption capacity

  12. What are the characteristics of scarce resources relevant to allocation?

  13. Stock-Flow Resources (raw materials, ecosystem goods) E.g. ecosystem structure Production = material transformation Used up, not worn out: use = depletion My use leaves less for you to use Rate of flow can generally be controlled We choose how fast to consume fossil fuels

  14. Fund-Service Resources(ecosystem functions, services, land, machines, labor) Structure generates function= ecosystem services Not transformed into what it produces My use may not leave less for you to use Human made F-S R wear out, not used up Natural F-S R spontaneously restored by solar power Rate of use cannot be controlled

  15. Pizza example Is the cook a fund-service or stock-flow? Is the oven a fund-service or stock-flow? What happens if the price of labor increases? Are the pizza ingredients a fund-service or stock flow? What happens if the price of ingredients increases?

  16. So What? Raw material extraction depletes ecosystem services Waste output depletes ecosystem services Services from nature include life support functions We cannot treat ecosystem goods and services independently– efficient allocation must consider both They are not substitutes

  17. Macroallocation How much ecosystem structure should be allocated toward economic production, and how much should be left intact to provide ecosystem services? Macro-opportunity costs: the ecosystem goods and services given up when we allocate structure towards economic production

  18. Excludability Excludable resource regime One person can prevent another from using the resource Necessary for markets to exist Non-excludable No enforceable property rights due to technology or social institutions Can’t charge for use Some resources non-excludable by nature. None are inherently excludable. Excludability is a product of institutions.

  19. Rivalness Rival Goods My use leaves less for you to use All ecosystem goods (stock-flow resources) are rival Non-rival (or non-depletable) My use does not leave less for you to use Marginal cost for additional user = 0 Efficient allocation: Price = marginal cost of production All non-rival resources are services Non-rival but congestible Do such resources exist? Rival or non-rival is an innate characteristic of the good, not a result of institutions

  20. Rivalness (cont.) Congestible resources When abundant, one person’s use does not affect another’s. Appears non-rival. When scarce, obvious that they are rival. Empty planet vs. full planet

  21. So What? Excludable Non-Excludable Open Access Regime: Oceanic fisheries, timberetc. from unprotected forests, waste absorption capacity Market Good: cars, houses, land, oil, timber, waste absorption capacity? Rival Tragedy of the non-commons: patented information, e.g. energy efficiency, pollution control tech. Pure Public Good: Information, most ecosystem services, e.g. climate stability, coastline protection, life support functions, etc. Non-rival Toll Good, club good:Roads, parks, beaches, etc. Congestible Free Rider Problem

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