Skip to main content
Article thumbnail
Location of Repository

Scarce or abundant?: the economics of natural resource availability

By Eric Neumayer


Most natural resources that are used in production are non-renewable. When they become depleted they are lost for future use. Does it follow that the limited availability of natural resources will at some time in the future constrain economic growth as many environmentalists believe? While classical economists have shared the belief in limits to growth, the distinctive feature of modern neoclassical economics is its optimism about the availability of natural resources. This survey suggests that resource optimism can be summarised in four propositions. First, a rise in the price of a resource leads to a substitution of this resource with another more abundant resource and to a substitution of products that are intensive in this resource. Second, a rise in the price of a resource leads to increased recycling of the resource and to the exploration and extraction of lower quality ores. Third, man-made capital can substitute for natural resources. Fourth, technical progress increases the efficiency of resource use and makes extraction of lower quality ores economical. In a critical analysis of these four propositions it is shown that while the conjecture that natural resources will never constrain future economic growth is logically conceivable, we do not and indeed cannot know whether it will be possible in practice to overcome any resource constraint

Topics: GE Environmental Sciences, HC Economic History and Conditions
Publisher: Blackwell Publishing
Year: 2000
DOI identifier: 10.1111/1467-6419.00112
OAI identifier:
Provided by: LSE Research Online

Suggested articles


  1. (1996). (eds.) Integrative Assessment of Mitigation, Impacts and Adaptation to Climate Change (pp. 353-377),
  2. (1981). (eds.) Modeling and measuring natural resource substitution, doi
  3. (1993). [1983] Energy-Capital Substitution: A General Equilibrium Analysis, Collaborative Paper, International Institute for Applied Systems Analysis Laxenburg
  4. (1979). 13 An important assumption is that there is no depreciation of man-made capital. As Dasgupta and Heal
  5. (1986). 4 It also holds for uncertainty if agents form rational expectations and there is a complete set of contingent forward markets. Neither is very realistic. See Graham-Tomasi, Runge and Hyde
  6. (1994). 6 A recent study of Moazzami and Anderson
  7. (1972). 8 The exponential reserve index is computed as ln(r.s+1)/r, where r is the average rate of consumption growth and s is the static reserve index (see Meadows et al.
  8. (1992). A Biophysical Analysis of the Energy/Real GDP Ratio: Implications for Substitution and Technical Change, doi
  9. (1985). A Martingale Characterization of the Price of a Non-renewable Resource with Decisions Involving Uncertainty, doi
  10. (1986). A Nested CES Approach to Capital-Energy Substitution, doi
  11. (1997). A Reexamination of the Role of Thermodynamics for doi
  12. (1985). A Test of the Hotelling Valuation Principle, doi
  13. (1991). A Test of the Theory of Exhaustible Resources, doi
  14. (1993). An almost practical step toward sustainability, doi
  15. (1996). Backstop Technology and Growth: Doomsday or Steady State?, doi
  16. (1980). Capital-Energy Substitution doi
  17. (1994). Capital-Energy Substitution and the Multi-Level CES Production Funtion, doi
  18. (1984). Concepts and Measures of Natural Resource Scarcity with a Summary of Recent Trends, doi
  19. (1986). course, Georgescu-Roegen was not so naive as to overlook the fact that the earth is not a closed system. He merely claimed that using solar energy needs more nonsolar energy input than is gained in energy eventually (Georgescu-Roegen
  20. (1992). Do Markets Underprice Natural-Resource Commodities?, Working Paper Nr. 962,
  21. (1984). Economic arguments on the sufficiency of natural resources,
  22. (1993). Economic Depreciation of Mineral Stocks and the Contribution of El Serafy.
  23. (1975). Economic Growth Versus the Environment,
  24. (1990). Economic Indicators of Resource Scarcity: A Critical Essay, doi
  25. (1991). Economic Indicators of Resource Scarcity: A More Critical Reply, doi
  26. (1979). Economic Theory and Exhaustible Resources, Cambridge: doi
  27. (1972). Economists, Scientists, and Environmental Catastrophe,
  28. (1995). Empirical Consequences of the Hotelling Principle.
  29. (1975). Energy and Economic Myths, doi
  30. (1992). Energy Efficiency and Economic Fallacies: A Reply, doi
  31. (1987). Energy Saving Resulting from the Adoptions of More Efficient Appliances, doi
  32. (1991). Energy Use in US Manufacturing: The Impacts of the Energy Shocks on Sectoral Output, Industry Structure, and Energy Intensity,
  33. Eric (1998a) Is Economic Growth the Environment’s Best Friend,
  34. Eric (1998b) Preserving Natural Capital in a World of Uncertainty and Scarce Financial Resources, doi
  35. (1995). Extinction and Market Forces: Two Case Studies, doi
  36. (1982). Factor Substitutability in Australian Manufacturing with Emphasis on Energy Inputs, doi
  37. (1995). Farzin
  38. (1986). Foresight and Expectations in doi
  39. (1988). Grade Selection Under Uncertainty: Least Cost Last and Other Anomalies, doi
  40. (1974). Growth and Antigrowth: What Are the Issues?. In
  41. (1990). Growth with Exhaustible Resources and a Materials-Balance Production Function,
  42. (1995). Hossein doi
  43. (1991). Indicators of Sustainable Development: Some Lessons from Capital Theory, doi
  44. (1984). Infinite Resources: The Ultimate Strategy, doi
  45. (1989). Information and Exhaustible Resources: A Bayesian Analysis, doi
  46. (1974). Intergenerational equity and exhaustible resources, doi
  47. (1977). Intergenerational Equity and the Investing of Rents from Exhaustible Resources, doi
  48. (1974). Is the end of the world at hand?. In
  49. (1991). Is the Entropy Law Relevant to the Economics of Natural Resource Scarcity?, doi
  50. (1938). Mathematical Analysis for Economists, doi
  51. (1992). Microeconomic Analysis,
  52. (1990). Mineral Depletion, With Special Reference to Petroleum, doi
  53. (1984). Mineral Reserves: Projected Lifetimes and Security of Supply,
  54. (1994). Modelling Natural Resource Scarcity Using the ‘Error-Correction’ Approach, doi
  55. (1996). Natural Resource and Environmental Economics,
  56. (1996). Natural Resource Prices: Will They Ever Turn Up?, doi
  57. (1980). Natural Resource Scarcity: Empirical Evidence and Public Policy, doi
  58. (1992). Natural Resources in a High-Tech Economy — Scarcity Versus Resourcefulness, doi
  59. (1990). Natural Resources, National Accounting and Economic Depreciation, doi
  60. (1987). Natural Resources, Population Growth, and Economic Well-Being,
  61. (1995). Neoclassical Economic Growth Theory and ‘Sustainability’.
  62. (1996). On Complete Recycling, doi
  63. (1986). On the Possibility of Continuing Expansion of Finite Resources, doi
  64. (1995). On Wilfred Beckerman's Critique of Sustainable Development, doi
  65. (1994). Operationalizing sustainable development by investing in natural capital,
  66. (1994). Recycling of Matter. doi
  67. (1994). Recycling of Matter. Further Comments, doi
  68. (1988). Resource Conservation, Sustainability and Technical Change. In
  69. Robert (1798) An Essay on the Principle of Population, doi
  70. (1995). Scarcity and Growth Revisited, doi
  71. (1979). Scarcity and Growth Revisited.
  72. (1963). Scarcity and Growth: The Economics of Natural Resource Availability, Baltimore: The Johns Hopkins University Press. doi
  73. Stanley (1865) The Coal Question: An Inquiry Concerning the Prospects of the Nation and the Probable Exhaustion of Our Coal Mines, doi
  74. (1992). Steady-state economics — Second edition with new essays, doi
  75. Stuart (1862) doi
  76. (1997). Substitution and Sustainability: Some Reflections on Georgescu-Roegen, doi
  77. (1979). Substitution between Energy and Non-Energy Inputs in the Netherlands 1950-1976, doi
  78. (1993). Sustainability: An Economist's Perspective.
  79. (1996). Sustainable Energy for Tomorrow’s World — The Case for an Optimistic View of the Future, doi
  80. (1985). Testing the Efficiency of Extraction from a Stock Resource, doi
  81. (1996). The ‘Recycle of Matter’ Debate. Physical Principles versus Practical Impossibility, doi
  82. (1979). The Adequacy of Measures for Signalling the Scarcity of Natural Resources.
  83. (1987). The capital-energy complementarity debate revisited,
  84. (1986). The Economics of Natural Resource Use, doi
  85. (1981). The Energy-Capital Complementarity Controversy: a Progress Report on Reconciliation Attempts.
  86. (1986). The Entropy Law and the Economic Process in Retrospect, doi
  87. (1971). The Entropy Law and the Economic Process, Cambridge: doi
  88. (1995). The Genie out of the Bottle: World Oil since 1970, doi
  89. (1990). The Greenhouse Effect: the Fallacies in the Energy Efficiency Solution, doi
  90. (1972). The Limits to Growth, doi
  91. (1974). The Optimal Depletion of Exhaustible Resources, doi
  92. (1978). The Optimal Exploration and Production of Non-renewable Resources, doi
  93. (1980). The Role of Technological Change, doi
  94. (1986). Thermodynamic and Economic Concepts as Related to Resource-Use Policies: Synthesis, doi
  95. (1993). Toward a Fossil Free Future: The Technical and Economic Feasibility of Phasing Out Global Fossil Fuel Use. In
  96. (1987). Toward a New Iron Age? — Quantitative Modeling of Resource Exhaustion, Cambridge (Mass.) doi
  97. (1982). Trends in Natural-Resource Commodity Prices: An Analysis of the Time Domain, doi
  98. (1999). Weak Versus Strong Sustainability: Exploring the Limits of Two Opposing Paradigms, doi
  99. (1996). What is Energy Efficiency?, doi
  100. (1989). who explain the apparent contradictory results as follows: Miller and Upton
  101. (1992). World Development Report doi
  102. (1973). World Dynamics: Measurement without Data, doi
  103. (1997). World Economic Outlook 1997, doi
  104. (1977). World Oil Reserves/Production Ratio in years (right scale) World Oil Reserves in Thousand Million Barrels (left scale) FIGURE 2 (Eric Neumayer) 2 World Natural Gas Reserves in Trillion Cubic Metres World Gas Reserves/Production Ratio in Years
  105. (1996). World Resources — a joint publication from the World Resources Institute, United Nations’ Environment Programme, United Nations’ Development Programme and the World Bank, doi
  106. (1995). World Tables doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.