Principles of Environmental Economics: Economics, Ecology and Public Policy

learning objectivesAfter reading this chapter you will be familiar with the following:

• the traditional economic classification of basic resources;

• the “anthropocentric” tendencies of the standard economic notions of natural resources;

• fungibility of resources;

• resource scarcity, opportunity cost and efficiency;

• the rudiments of a market economy and its basic constituents;

• the production possibility frontier;

• the difference between efficiency and optimality;

• flow versus stock concepts of resources;

• the neoclassical economic perspective of the human economy and the extent to which it depends on the natural world.

Before any element can be classified as a resource, two basic preconditions must be satisfied: first, the knowledge and technical skills must exist to allow its extraction and utilization; and second, there must be a demand for the materials or services produced. If either of these conditions is not satisfied then the physical substances remain neutral stuff. It is, therefore, human ability and need which create resource value, not merely physical presence.

(Rees 1985:11)

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