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Unit One: Key Concepts
Unit Information 2
Unit Overview 2
Unit Aims 2
Unit Learning Outcomes 2
Unit Interdependencies 2
Key Readings 3
Further Reading 3
References 4
Multimedia 4
1.0 Introduction 5
Section Overview 5
Section Learning Outcomes 5
1.1 Classifying natural resources 5
1.2 Sustainability 7
1.3 Origins and related disciplines 9
Section 1 Self Assessment Questions 12
2.0 Economy and environment 14
Section Overview 14
Section Learning Outcomes 14
2.1 Interdependence 14
2.2 Services 16
Section 2 Self Assessment Questions 20
Unit Summary 21
Unit Self Assessment Questions 22
Key Terms and Concepts 24
P505 Natural Resource Economics Unit 1
UNIT INFORMATION
Unit Overview
This unit introduces key concepts in natural resource economics. The introductory
section begins with a short classification of natural resources, before looking briefly
at the concept of sustainability. We look at the intellectual foundations of natural
resource economics and what distinguishes the discipline from environmental
economics and ecological economics, before moving on, in Section 2, to examine the
interconnections between the economy and the environment, including the services
that the environment supplies to the economy.
Unit Aims
To define natural resources and natural resource economics.
To outline the interconnections between the economy and the environment.
Unit Learning Outcomes
By the end of this unit, students should be able to:
distinguish between different types of natural resources and explain the
difference between natural resource economics and related disciplines
discuss the interconnections between the economy and the environment
Unit Interdependencies
This unit is an introductory unit that sets the scene for all of the following units.
Consequently, you will find yourself being introduced to ideas and concepts that
aren’t always fully explained, but which will become clearer in later units.
Sustainability, for example (see Section 1.2) will be examined in much greater detail
in Unit 3, welfare economics (see Section 1.3) is the subject of Units 4 and 5, and
natural resource scarcity (see Section 1.2) will be examined in more detail in Unit 6.
© SOAS CeDEP 2
P505 Natural Resource Economics Unit 1
KEY READINGS
Section 1
Perman R, Ma Y, Common M, Maddison D, McGilvray J (2011) An introduction to
natural resource and environmental economics. In: Natural Resource and
Environmental Economics, 4th edn. Pearson Education, pp. 1–15.
This reading is the introductory chapter to the textbook by Perman et al. It looks at the origins
of natural resource economics and introduces some key concepts. You might want to revisit the
discussion of efficiency and optimality after reading both Units 1 and 2 as you will find further
clarification there.
Section 2
Perman R, Ma Y, Common M, Maddison D, McGilvray J (2011) Natural Resource
and Environmental Economics, 4th edn. Pearson Education, pp. 16–21.
This reading is the first part of chapter 2 in the textbook by Perman et al. Read up to the end of
Section 2.1.2. It relates specifically to Section 2 on the economy–environment interdependence.
FURTHER READING
Bromley DW (ed) (1995) The Handbook of Environmental Economics. Blackwell
Publishers, Oxford, UK and Cambridge, USA.
© SOAS CeDEP 3
P505 Natural Resource Economics Unit 1
REFERENCES
Boulding K (1966) The economics of the coming spaceship earth. In: Jarrett H (ed)
Environmental Quality in a Growing Economy. Resources for the Future/Johns
Hopkins University Press, Baltimore, pp. 3–14.
Helm D (2011) Peak oil and energy policy – a critique. Oxford Review of Economic
Policy 27(1) 68–91.
Hotelling H (1931) The economics of exhaustible resources. Journal of Political
Economy 39(2) 137–175.
Meadows DH, Meadows DL, Randers J, Behrens WW (1972) The Limits to Growth: a
Report for the Club of Rome’s Project on the Predicament of Mankind. Universe
Books, New York.
Mensbrugghe D, Osorio-Rodarte I, Burns A, Baffes J (2009) Macroeconomic
Environment, Commodity Markets: a Longer Term Outlook. Paper prepared for the
Expert Meeting on How to feed the World in 2050, 24–26 June 2009, Rome, Food and
Agriculture Organization of the United Nations (FAO).
Pearce D, Turner RK (1990) Natural Resource Economics and the Environment.
Harvester Wheatsheaf.
Pigou A (1920) The Economics of Welfare. Macmillan, London.
Thomas RL (1999) Using Mathematics in Economics, 2nd edn. Pearson Education.
MULTIMEDIA
Horwitz S (28 February 2011) Are we Running out of Resources? Institute for
Humane Studies, LearnLiberty.org.
Available from: http://www.youtube.com/watch?v=AcWkN4ngR2Y
An optimistic view from Professor Steve Horwitz in which he discusses economic reasons why we
may never run out of many resources. In a free market system, prices signal scarcity and as a
resource becomes more scarce it usually becomes more expensive. This can reduce demand and
create incentives to develop alternatives or to find and exploit new reserves of that resource
previously undiscovered or too costly to exploit. Market incentives and innovation are necessary
for this to succeed.
Meadows D (2009) Growth versus Development. World Resources Forum 2009, 14–
16 September 2009, Davos, Switzerland.
Available from: http://www.youtube.com/watch?v=gSPHzkAHwqY
Dennis Meadows, co-author of The Limits to Growth (1972), on natural resources, growth, and
development.
© SOAS CeDEP 4
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