So let's start to take a bit of a
systemic approach , and see the economy and the
environment as two different systems, and let's
ask ourselves, "Which is the relations
between these two systems?".
Well, what we can say in a very general
term, is that on one side the economic system
influences the environment, or it changes
the way it is, the way
it behaves, the way it can develop.
The human influence on
the environment is undeniable.
But on the other side, which is the
role of the environment for the economic system?
And if we have to summarize this in a
single word, I think the most pertinent word is
those "to limit".
You know, we have an infinite wish of things.
Humans have an infinite wish of things.
However we cannot fulfil all our infinite
wishes, because we are exactly limited by
what we have , and what we can achieve
- the environment is one, the technology is
another limit.
So together with the technology, the environment
limits what is achievable for the
economic system to produce and to fulfil the needs
of the people leaving in the economic system.
So, we can see the environment in relation
to the economic system in two different ways.
We can see it as an
inputs for the economic system.
And so we have fossil fuels - that
we will see extensively -, minerals, food resources
and so on. But we can think also to
the environment as the exit source of the by-products
of the economic system, what the economic
system produces, but it doesn't want it.
We call these pollutions, so we can see
as natural resources also the atmosphere, or the
rivers, or the waste dumps.
Why we are interested in this
course in natural resources ?
We are in a unit of natural resource
economics, meaning that we have some interest, some
economic interest, natural resources
have some economic interests.
And we can summarize this one in two reasons.
The first reasons is, as we said, usefulness.
The economic system cannot live alone, it needs
as inputs - or output - the environment
and the natural resources , to produce the goods
that at the end will fulfil the needs of
people. But usefulness itself is not
enough for having an economic interest.
There are a lot of things that are
useful but don't have an economic interest.
Think in general, about the air, for example.
The other big characteristic that something needs
to have to have an economic interests
is scarcity.
Economic has been defined as the
science to manage scarce resources.
If our source is not scarce, there is no tension
in how to use it, and there is no
economic needs, interest in
using this resource.
So , going a little bit more deeply on
these aspects, in relation to the level of
scarcity of the resource, we often make a
distinction between two kind s of resources.
The non-renewable resources , like
fossil fuels or minerals.
These ones do not reproduce themselves, at least
not in times that are comparable with
the human scales.
So there exists fixed amount, and
the quantity cannot be extended.
And so , for for this kind of
resources, the sustainable strategies is those of recycling.
So , after the resource enter s the economic system,
it should be use d it , and use d
it, and used it again , rather
than wasted back to the environment.
And the second strategy that we will look on
extensively on this course is those of substitution.
So we will try to substitute the resource
with other natural resources or with capital
made by humans, so no longer some "natural"
resources, but something that has been built
by human through natural resources.
The second big group of natural
resources, is the renewable one.
So thinks about food, fish
resources or even water quality.
And , for this kind of resources, the sustainable
strategy is to use the resource in a
level that is below the capacity
of the resource itself to reproduce.
For example, to use everyday less than the
quantity that the fishery can produce in terms
of fish. And we have to face
here with two kinds of problems.
The first one is that unfortunately we are
unable to measure exactly how much the
resource can regenerate itself.
We may have some idea about it.
For example, we can create inventories to calculate
how much forest, how much wood is
produced in a forest, but we do not
never know exactly how much is produced.
And then there are some hazards around it.
There could be some storms, or some fire.
So we never know exactly how much
can we produce out of the resource.
And the second problem, when we use renewable
resources , is that, unfortunately, we have
negative feedbacks in using the resource.
The way most renewable natural resources work,
are that their capacity to recover
depends on the quality and
quantity of the resource.
And when we start using too much of
the resource, when we are overused the renewable
resource, we are going not only to reduce the
quality or quantity of the resource, but in
this way we are also going to reduce
the capacity of the resource to regenerate itself.
So we are facing some negative feedbacks
of over exploitation of our renewable resource.
So , let's start now asking a very important
question , before we study the optimal usage
of natural resources .
It is "Can do we
really have sustainable development ?"
Intended in a conventional , economic way,
that is a non declining per capital
consumption that is maintained
over an indefinite time.
That is, per capita consumption is the
GDP, and we define "economic" sustainable
development , a development that keeps the level
of GDP , of per capita consumption, at
least at the same level, so we may have
GDP that doesn't grow, but not GDP that
decreases, and this one forever.
This is only one
criteria of sustainable development.
Actually, sustainable development is a
multi-dimensional concept that includes other
dimensions than the economic one , like the
social one: we do not have a sustainable
development if we have few rich people and
many poor, or we don't have a sustainable
development if the environmental ecosystems do
not preserve their functions, so those
that are not used by humans .
But here , and across the whole unit ,
we will consider this very simple definition of a
sustainable development.
We are using this one because, exactly, that reason
, it is simple, and so it is somehow
quantifiable. So we can reason
about this in quantitative terms.
But we should always keep in mind , in our
mind , that there are also other dimensions in
the definition of sustainable development.
And so the question is pretty simple:
well, by definition, non-renewable resources exist
only in finite quantities while, how
can they support an infinite level
of consumptions?
And indeed, this leads to many discussions.
Because this reasoning seems to suggest
that we cannot have production and
consumption that continue forever.
This is a quote from a biologist that he
say that "Since natural resources are finite ,
increased consumption must inevitably lead
to depletion and scarcity".
This is also something that has been come
out as a results from a very influential
report , "The Limits
to Growth", of nineteen-seventy-two.
We are in a period where
we are starting the environmental debate.
We have the oil crisis and the oil shock.
And we are also in the period where
we start having the first big mainframe computers,
something very expensive that few research
groups can afford to use.
And so here, the so-called Club of Rome gave
the task to produce this report to some
M.I.T. scientists , and the results of this
report, that use d extensively the first
simulation models of the history , was
that economic growth, according to this report,
could not continue infinitely .
Because , exactly, the economic system is limited
by the amount of resources that are
available. So , this is
the report, "The limits
to Growth" and you can download it from the web
site of one of the authors and really the
idea here is that the economic growth will
be eventually stopped by some sort of
constraints of the environment .
And they use really the word "carrying capacity",
that is something as a concept from the
ecological literature, where a population would grow,
but it would eventually be limited
by its environment until a certain level,
for example, because of availability of food.
And in this report, they consider the
humans nothing different than a populations.
And so we have "Time"
here and they assume that
there is a carrying capacity of the Earth
and that the economic growth is not anything
different than a growth of a populations
that will reach its carrying capacity.
And in particular in this book, what the y
claim is that the economic growth is actually
too fast. So , instead of having a curve like
this one, what we are actually doing is we
are getting a curve like this.
So that we are going to o fast, but
we are going to cross the carrying capacity.
But this will inevitably leads to the negative
feedbacks and to a collapse of the
economic system , until we
will reach eventually an equilibrium.
Again, this has been a very influential report
that while, for now, we didn't actually
expected this kind of behaviour.
While there are many reasons, the most important
one is that there is very little economy
in this book. So there
is very little economic feedbacks.
But when the resource become less and less available,
we'll see , its price also tends to
increase and thus leads the economic system
to switch to something else, for
example.
So , which could be the way that
we could pursuit continuous growth of the economic
system , still using resources
that are not renewable ?
Well, the first way is that we
could have consumption rate that declines asymptotically
toward zero, without never reach it.
It is what we saw in the previous slides.
The case where we have our carrying capacity and
we are approaching it, but we will do
not actually never reach it.
In this way, we can have a continuous
level of growth, altought smaller and smoller and
smaller , for an infinite amount of time.
The second way that we could approach this
problem is thinking that there could be what
is called a "backstop" technology that become
s available when again the no n
renewable resource becomes so much constrained that
his price becomes so high that, at
that point, it becomes more convenient
to use some thing else.
And here, I really like this quote that "The
Stone Age didn't really end s because we ran
out of stones " to say that, really,
some other technology rises up that becomes more
efficient than just using stones for the needs
of the society in that historical period.
So even with what we consider now
essential, non-renewable resources, the need may change
to ward somehting else.
Or, we could also have the case that while
the resource is useful, it is not necessary.
So what we say here is that we may
have some level of productions that still are
positive, even without the natural resources.
And this depends on the form of the
production function and sometimes depending on its
parameters. In all these cases , we see that
whatever the output could arise , or at
least remain constants, depend s on the
extent to which other resources can be
substituted for the non-renewable resources, when
these become more and more scarce.
