20 Resource Development and Environment: Cases of Optimism

Mr. Dhiren Borisa

Learning Objectives:

After studying this unit you should be able to:

• Some of the Optimistic models of resource development and their relationship with environment
• Distinction between the pessimists and optimists regarding resource development Issues around Sustainability of Resources

Introduction:

Malthusian model of exponential growth in population with a corresponding linear growth in resource supply presented a pessimistic view of resource development of the world. Earth’s carrying capacity to support the growing needs of human population was predicted to outrun the growth in population. This worldview although dictated for a significant part of industrial history in writings of the club of Rome and others, the world did not collapse as predicted. We survived as we entered 21st century the proposals of the Global 2000 report. Nevertheless, the neo-Malthusians extend this worldview as they witness the growing population in developing countries and threatening levels of environmental deterioration. On the contrary, optimists believe that while, humans certainly faced severe environmental threats their ingenuity helped them overcome many of such hurdles by devising new technology, finding substitutes for the depleting resources and increasing efficiency. This worldview mostly proposed by the economists looked at industrial impact on environment and resource consumption rather optimistically. It acknowledged the growing pressures on the environment of rising population but did not take it as an end all situation to compromise on living standards or the collapse of civilization.

Unlike the pre-industrial world where existed only a limited pool of resources on which human population depended, say, food items or wood or animal traction for energy source, societies today are much complex with a range of environmental resources at hand and many more being developed. One cannot thus pinpoint one resource and pressure on the same as the reason to establish the collapse of human race. Computer simulation models dating their use since Meadows and Meadows published ‘Limits to Growth’, later Global 2000 report and in 1991 the updated vision of the club of Rome titled ‘Beyond the Limits’ attempted at using multiple variables to establish the pessimistic outlook of the future world if current trends continued. They believed especially the later work of the club of Rome that despite exponential growth in population and similar trends in technological advancements and resource efficiency, these resource growth patterns still have an upper limit. This, Edward Hill (2014) argues gained some currency and proof when agricultural production depending on land was supplemented by fisheries leading to increase in fish supply over the demand, but with the likelihood that marine ecosystems have upper limit to how much fish they can produce. Similarly, the hailing of nuclear technology as the turning point in 1950s as alternative to fossil fuel consumption and much efficient means soon realised increase in cost in terms of raw material supply, and issues around nuclear waste disposal by mid 70s.

What distinguishes Optimists from the pessimist worldview mentioned above? There are three points of difference among others. One, while there is acknowledgement of environmental deterioration, optimist contend on the severity of the crisis. They believe the situation suggested and predicted by the pessimists are much exaggerated. Second, while there is agreement regarding the exponential growth of population, optimists disagree with the linearity of resource development. They believe that much like population, technological knowledge can also grow exponentially. Third, optimists give importance to human ingenuity in avoiding disaster of Malthusian proportions.

Role of Human Ingenuity in Natural Resource Development:

Mostly propagated by the economists, the optimist model of resource development gave emphasis to human ingenuity. Within the economist view of making choices among scarcity of resources, it is believed that with every depletion in resources its price in every likelihood rises providing incentive to seek further supplies to cater to the demand making it profitable. This takes place in form of looking out for newer locations for resource supply. This can also take form of extracting resources from locations that were previously classified as inaccessible and economically non-viable. However, given the limitedness of these locations humans can also look out for newer and efficient substitutes for the dwindling resources, or further develop technologies to make efficient usage of the limited resource. This efficient technology then also entails reduction in pollutants and harmful emissions and ways to dispense additional waste. These ingenious efforts enhance human capabilities to combat any pessimistic prediction of a collapse.

1. Kauffman and Cleveland (2007) suggest some of the following ingenious ways in wake of exponential population growth and dwindling resources:
2. Improvement in technology to extract and utilize the resource
3. Given the scarcity of resource, a possibility to develop a substitute to reduce the pressure on the scarce resource
4. Efficiency in terms of the per unit output from the resource required in the production process
5. Reduction in waste generation
6. If waste cannot be reduced then technology can be devised to clean-up the waste produced during the production process

Human history has experienced such ingenious attempts of resource conservation during the times of oil crisis of 1970s when in wake of rising prices of oil new offshore locations for extracting the resource were discovered. Similarly in case of ozone depletion when technologies were devised to reduce chlorofluorocarbons (CFC) within refrigeration systems without compromising on the use of the technology in enabling a living standard.

Harold Hotelling (1931) in his economic model depicting a free market competition and the problem of exhaustible resources, the problem of the finite mineral wealth argues that over time the profit maximising behaviour of the free market enterprise will put resources to efficient use. He questioned the appeal of the conservationists to completely forbid the usage of exhaustible resources. He argued such calls as against taxation or regulatory measures, continue to aid monopolist and partially monopolist markets to sustain high prices of commodities produced using exhaustible resources rather than help save these resources for posterity to use. Hotelling build his argument on the concept of Resource Rent. Resource rent refers to the net price over the cost of extraction of the resource that a producer is likely to gain at a point of time. It is also called scarcity rent. He argued that in a competitive market setup each producer would compare their resource rents over different times to administer restraint on extraction of resources and production of commodities. This he believed was the typical profit making behaviour of these firms and such is reflected in the current resource prices as a product of the market consensus based upon foresight of scarcity of such resources and plausible returns.

Robert Solow in his 1974 article “The Economic of Resources or the Resources of Economics” extended Hotelling’s argument on resource rent by suggesting the relationship between scarcity of resources and their rising prices and how such influence resource conservation. He argued unlike the pessimist viewpoint of putting an end to resource use, these rising prices of resources are likely to work as incentive to seek better technologies for efficient usage, new and better substitutes or extraction techniques. Solow suggested that the solution to ecological crisis was not curbing down our standard of living but continue capital investments to strengthen efficiency in resource use.

Herman Kahn, William Brown and Leon Martel (1976) presented in their book “The Next 200 Years” an emphatic dismissal of the “limits of Growth”. They argued that 200 years prior to the present we were few in numbers, poor and at the mercy of the nature’s forces but the present is the testimony that how we have overcome a lot of these hurdles. If economic growth continues improving technological knowledge will put us 200 years from now in a better position of control over resources, better standard of living, equitable distribution and more power over natural forces that pessimists frighten us of. The authors presented a different future targeting the year 2176 with population of 15 billion people, sixty times the material consumption of the present and the per-capita Gross World Product at 20,000 $. The world of future is according to them a much happier place to live with population not having to worry about the current day problems of poverty, malnutrition, pollution and inequality. That these problems are likely to resolve themselves on their own or serve us with some practical solutions. That we would have as future generations more time to invest in leisure activities. The assumption behind their very optimistic future relied on the belief that there are no physical limitations to growth only sociological and psychological. It is our lack of confidence on human potential that limits us.

In the similar strand, “The Ultimate Resources” published in the year 1981 by Julian Lincoln Simon argued that the ultimate resource are the human beings and their imaginative capacities. Building on the arguments of other resource economists like Hotelling, Solow and others, Simon maintained the relationship between scarce resources and rising prices as incentivizing search for better efficient technologies and substitutes for scarce resources. Simon distinguished between engineering forecasting and economic forecasting. The former bases the forecasting of the future based upon the present set of known resources without consideration of the future possibilities and technologies. Simon says such forecasting is insufficient economic forecasting instead that takes into consideration things which engineering forecasting leaves out. He argues one needs to take into consideration three things. One, is the time period being forecasted different from the past. Second, if the data projects a similar trend that deciphering the explanation of it. And third, only then project the data from the past on the future. Simon was criticized on suggesting that natural resources are infinite by only taking into consideration the inflation adjusted prices of the resources and also that population growth ultimately creates own resources .

Optimists base their argument on following points:

a) Productive efficiency of finite resources has enhanced over time. For e.g. the increase in agricultural yield from a finite area of land.

b) There has been decrease in pollution with increasing population and standard of living. Environment quality is taken as a luxury good, the demand of which increases with increase in per capita income.

c) Forecasting of future resource development cannot overlook human capacities to adapt with new resource endowments.

d) Optimists question the fixity of carrying capacity and the production and usage of resources by humans at a steady rate by exposing the oversimplified, mechanistic and short-sighted nature of pessimistic models.

e) Optimists show faith in free market forces as self-regulating. They believe that market well efficient allocate resources. There is also more confidence in human adaptability.

f) Optimist models distinguish between market failure and Government failure and argue latter as more risky.

g) They also distinguish between efficient and inefficient market allocations and argue for government interventions only on inefficient markets.

The Need for Sustainability

After the broad overview of the optimistic and pessimistic models in terms of the relationship between resource development and their impact on environment, one cannot deny the need for sustainability. Sustainability as an approach of understanding ecological relationships banks at integrating society, economy and environment. It works on the principle of maintaining and utilization of resources in a way that does not compromise the need of future generations. The 1987 definition of the United Nation’s World Commission on Environment and Development (WECD) explains sustainability “development that meets the needs of the present without compromising the ability of future generations to meet their own demands”.

Sustainability is a vague concept that builds on the acknowledgment of limitations of resources and human needs with a possibility of improving human capacity and standard of living and equal distribution of resources for present and future. Sustainability issues can be classified into three categories, social/political, environmental and economic issues.

Sustainability is a dynamic concept. It requires flexibility of approach and demands willingness to modify our growth trajectories according to environmental challenges, human needs and wants and technological advancements.

Summary:

There have been various ways of understanding the environmental crisis of the 21st century building on the various forecasts through the history. The over increasing population sizes and pressures on non-renewable resources has been of stark nature. The worldviews explaining these relationships have been both optimistic and pessimistic in nature. The predictions of the ecologists have been more towards a grim future with excessive pressures on the environment to a level that the earth’s carrying capacity will fail in pressure of growing population and the civilization will crash and burn. The economist on the contrary as discussed through this chapter have been the optimists with full faith in human capacities to adapt to changes in resource endowments. The view privileges free market operations to efficiently allocate limited resources without compromising the standards of the present and future generations. Pessimists believe market incentives, government policies of regulation and taxation of inefficient markets, recycling of resources, development of new efficient technologies of both extraction, utilization and waste cleaning and substitution to resources and commodities as modes of resolving the environmental crisis of the exhaustibility of resources.

References

• Hill, E. (2014). Resource Pessimists and Optimists.
• Http://www.trunity.net/sam2/view/article/51cbf3ae7896bb431f6adb2b/.
• Hotelling, H. (april 1931). The Economics of Exhaustible Resources. Journal of Political Economy, 39(2), 137-175.
• Kahn, H., Brown, W., & Martel, L. (1976). The next 200 years. London: Abacus.
• Kaufmann, R. K., & Cleveland, C. J. (2007). Environmental science. Dubuque, IA: McGraw-Hill.
• Mensah, A. M., & Castro, L. C. (2004). Sustainable Resource Use & Sustainable Development: A Contradiction?! . Zentrum fur Entwicklungsfourschung (ZEF) Center for Development Research University of Bonn . Retrieved from https://www.zef.de/fileadmin/downloads/forum/docprog/Termpapers/2004_3b_Mens ah_Castro.pdf.
• Pearce, A. R. (1999). The Science and Engineering of Sustainability: A Primer, Technical paper produced for the Institute of Sustainable Technology and Development, Georgia Institute of Technology, Atlanta, GA. Available at: http://maven.gtri.gatech.edu/sfi/resources/pdf/TR/TR018.PDF
• Simon, J. L. (1981). The ultimate resource. Princeton, NJ: Princeton Univ. Press. Solow, R. M. (1974). The Economics of Resources or the Resources of Economics. The American Economic Review, 64(2), 1-13.