Principles of Environmental Economics: Economics, Ecology and Public Policy

Labor is the father and nature is the mother of wealth.

(Petty 1899:2:377)

The study of natural resources, the subject matter of this book, involves theories and concepts that seem to be continually evolving with the passage of time and with our improved understanding of the natural circumstances that govern these resources. For example, the preclassical or Physiocratic school (1756-78) and classical economists (1776-1890) typically used land as a generic term to describe natural resources. To these economists, land or natural resources represented one of the three major categories of basic resources essential to the production of goods and services—the other two being labor and capital.

This three-way classification of basic resources or factors of production seems to persist, although our understanding of natural resources and their roles in the economic process has changed markedly. Advances in the natural and physical sciences have increased our knowledge of the laws that govern the natural world. Furthermore, as the human economy continues to expand, its impacts on the natural world have become sizable and potentially detrimental. Inevitably our conception of natural resources tends to be influenced by our current understanding of the human economy and its interrelationship with the natural world.

Broadly defined, natural resources include all the “original” elements that comprise the Earth’s natural endowments or the life-support systems: air, water, the Earth’s crust and radiation from the sun. Some representative examples of natural resources are arable land, wilderness areas, mineral fuels and nonfuel minerals, watersheds, and the ability of the natural environment to degrade waste and absorb ultraviolet light from the sun.

Natural resources are generally grouped into two major categories: renewable and nonrenewable natural resources. Renewable resources are

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