ABSTRACT
In this chapter, we will continue to use Figure 2.3 as the basis for our illustrations. In that figure, arrows for resources and amenities (R+A) and waste flows (W) were regarded as a composite service flow from the environment to the economy. The aim of this chapter is to illustrate how the market model, and its adaptations to include public goods and externalities, can be applied to the case of specific environmental resources. These are goods that have been traditionally classified as non-renewable and renewable resources. As the term implies, non-renewable resources are not renewed at timescales of relevance to human decision-making. As a consequence, they are finite and hence can be exhausted. Renewable resources, in contrast, possess the property of regeneration and thus with careful management can be sustained over time. However, it is important to note that all natural resources – renewable or otherwise – are integral components of complex ecosystems. Fish are part of a food web that connects not only across oceans but also across the ocean, land, and air interface, for example, when sea birds feast on them and then deposit guano on land, where it may provide valuable nutrient input into terrestrial ecosystems. Copper and many other trace elements that are considered non-renewable resources are found within our bodies and moved through ecosystems via a complex set of biophysical cycles. Such integral linkages among the living and non-living components of the ecosystem, and the underlying non-renewable and renewable resource endowments, are typically disregarded in economic models of natural resource use. As a consequence, important aspects of resource use are neglected, and thus the opportunity cost of using these resources is inappropriately conceived and quantified. The recognition of these linkages would allow a more accurate calculation of the marginal social costs that we considered in the previous chapter.
