Section outline

  • Kia ora 9C1, this week we are applying our understandings of both economics and socioeconomics in the construction of your ideal economic system. You have a clear set of values from which to assess your choices and reflect upon the opportunity costs. The next step is to integrate our natural resources into the economy, while maintaining clear explanations of how the choices your team has made are justified.

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    The overall activity this week remains the structuring of your team's economy, the learning however will be related to the production cycle and social impacts of the industries that have grown around the resources you have discovered on the island.

    The Different Types of Natural Resources You Ought to Know - Help Save Nature

    Success Criteria: I can/have...

    • Connect my team's economic policies and plans to the set of values which underpin our ideal economy
    • Explain how the natural resources on the island relate to the economic world of production
    • Explain how the production cycle of the industries who use these natural resources have and impact on the social world (by looking at the production process & how it intersects with human rights)

    Activities:

    1. Completing production plan for Economy
    2. Engaging with the creation of the policies your economy will function on
    3. Natural Resources - Investigating the production cycle (or supply line) and its connection to human rights

    Homework:
    - Predict the nature of one of the problems your economy may face in next week's problem-set; think about how your economy would adapt, if your prediction was accurate.

    Natural resources and the paradox of infinite growth

    That the limited availability of natural resources may threaten economic growth has preoccupied economists since the birth of the discipline. Thomas Malthus, David Ricardo, John Stuart Mill, and other classical economists have paid so much attention to the limits to growth caused by finite natural resources that they have given these limits a central role in their analysis of the long-term dynamic evolution of market economies towards a stationary state. The gloomy conclusions reached by those early economists have received a modern formulation and further support in recent years with the works of G. Hardin and Baden, 1977; and H. S. D. Cole et al., 1973.

    Modern economic theory allows us to distinguish between different characteristics of natural resources which are directly relevant to the problem in question. A resource is said to be exhaustible if one can find a pattern of use for this resource such that it will be depleted in finite time. Clearly, almost any natural resource, with perhaps the exception of solar energy, is exhaustible. A resource is said to be renewable if one can find a pattern of positive use such that its stock does not shrink over time. One can think of a fishery or of soil fertility as good illustrations of a renewable resource. Of course, if concern is about the issue of economic development and the possible constraints which natural resources may place on it, interest will naturally focus on the analysis of exhaustible and non-renewable resources which are essential. The definition of the latter concept is intuitive, though, as we shall see, it is not very useful: a resource is essential in production if 'the output of final goods is nil in the absence of the resource' (Dasgupta and Heal, 1974: 4). A similar definition can be used for a resource essential in consumption.

    As pointed out by Stiglitz (1974), there are at least three ways to counterbalance the negative effects of essential resources on production: technical progress, increasing returns to scale, and substitution. The third factor needs to be examined in detail. Three different situations may again arise when one analyses the possibilities for substituting a reproducible input, say capital, to an increasingly scarce essential resource. 

    References:

    1. Cole, H. S. A., et al., 1973, Thinking about the Future: ,4 Critique of the Limits to Growth (Chatto & Windus, for Sussex University Press).

    2. Hardin, G., 1968, 'The Tragedy of the Commons', Science, 162: 1243-48.

      ——and J. Baden (eds.) (1977), Managing the Commons (San Francisco: W. H. Freeman & Co.): 8 15.


    3. Stiglitz, J., 1974, 'Growth with Exhaustible Natural Resources: The Competitive Economy', Review of Economic Studies, Symposium on the Economics of Exhaustible Resources, 41: 123-38.

      ——1976, 'The Efficiency Wage Hypothesis, Surplus Labour and the Distribution of Income in LDCs', Oxford Economic Papers, 28/2: 185-207.

    4. Dasgupta, P., 1988, 'Trust as a Commodity', in D. Gambetta (ed.), Trust-Making and Breaking Cooperative Relations (Oxford: Blackwell): 49-72.

      ——1993, An Inquiry Into Well-Being and Destitution (Oxford: Clarendon Press).

      ——and G. Heal, 1974, 'The Optimal Depletion of Exhaustible Resources', Review of Economic Studies, Symposium on the Economics of Exhaustible Resources, 41: 3-28.

      ——1979, Economic Theory and Exhaustible Resources (Cambridge: Nisbet & Co. Ltd and Cambridge University Press).