“Trade dispenses the natural wealth of the world, and trade raises new species of wealth, which nature knew nothing of.” Defoe

In this chapter, I shall examine the economic theory explaining the use of natural resources. To many economists, this subject may have a novel ring, for, although natural resources crop up wherever the theories of production and distribution are being examined, there is a disposition to leave Nature out of explicit consideration. The assumption usually made instead that “tastes, technologyand so forth areregarded as given.” To other economists the subject is unnecessary because it is assumed that...

What do the conservationists mean by “conservation”? Conservationists may be divided into two groups: conservationists-at-large and conservationists of a particular resource. The latter class consists largely of specialists in a particular subject (zoologists in the case of wildlife conservation, or foresters in the case o f trees) who believe that the resource in question is being used up too quickly or is not being reproduced quickly enough. The conservation movement originally involved an enthusiasm for the simultaneous conservation of all resources, but this drive has slackened. Most publicity now concerns a particular resource, or occasionally a particular region. The conservation...

In the previous chapter I defined conservation as a policy involving public action. I argued that this action must, if the definition is to have any meaning at all, lead to increasing the future supplies of a resource by reducing present use or by increasing present restorative investments. This definition was adopted for the sake of precision, and it would be interesting to ask to what extent the various countries concerned with the use of their natural resources have practiced conservation in just this sense.

Unfortunately for this definition, public policies are usually adopted for a variety of reasons, involving...

It is apparent from the study of conservationist practices in Europe and North America that nations have not always left individuals to make their own decisions about using up or conserving natural resources, but have imposed protective programmes for social and political reasons.

We can, I think, classify under three headings the conservationist objections to leaving decisions about resource use to the individual.

In the first place, the conservationist believes that the maximum social benefit is not achieved by each individual’s maximizing his private benefit, because there are certain social benefits to be derived from conservation which are not appreciable...

Earlier in this study it was argued that owners of natural resources and investors in replaceable resources must, in order to maximize their profits, make sure that they have supplies available when the demand is greatest. They will therefore defer the use of stock resources and invest in flow resources if they think the price will eventually rise sufficiently to make their investment worth their while. Meanwhile, businessmen who control possible substitutes for the resources in question will develop these substitutes, and users o f the products made from the resource will switch to cheaper materials as the price rises....

The social benefits of conservation discussed in the last chapter might be described as long-run benefits, both because they do not accrue during a period of fixed productive capital stock and also because they are specifically concerned with the change in the provision for the future brought about by certain present social causes. There are also what economists call “short-run” social benefits, short-run because they are concerned with the given stock of capital during an emergency (a fixed period of time) and with the effect of investment on the level of employment without regard to its effect on the total...

In the Introduction to Part Two, I undertook to classify briefly the conservationist objections to entrusting to individuals the power to make decisions about the rate of use of resources over time. The first objection, which has been dealt with in the two preceding chapters, was that since the individual was not urgently aware of the social benefits which might arise from a slower rate of use he might exploit resources “too quickly.” The second objection was that the argument that the individual will make the best decision is based upon certain laissez-faire assumptions: chiefly, the assumptions of the theory...

Of all the forces which determine the use of privately owned resources, entrepreneurial expectations of future markets and future costs are perhaps most important, when taken in conjunction with the going or relevant rate of interest. Is this rate of interest, which has such an influence on the degree of conservation, low enough? The circumstances under which it might be said that society is not getting socially desirable behaviour from the owners of resources, because such behaviour is not the most profitable from the individual’s point of view, have already been suggested. It remains to examine another theory,that owners do...

It would be unreasonable to demand that the state make economic policy decisions on the grounds of efficiency alone, especially when “efficiency” is used in the sense of thrifty production of saleable goods. For the legislature is free of the limitations of market valuations and may make policies independently of prices and costs, heeding only its own-or its servants’ – appraisals of the losses and gains resulting from its decisions. Such losses and gains may well transcend the estimates of the market pricing process and reflect some notion of social benefits and social costs. Another way of expressing this is to...

The state which desires to promote conservation has at its disposal a number of methods, some of which are of a directly interventionist nature. The government may socialize the resource; regulate its use by individuals; or educate and encourage individuals in their private management through what I have called “liaison.”

In one sense there is an initial decision to be made: should natural resources be in private hands at all? In most Western countries this decision has already been made, and many resources,or right over their exploitation, are temporarily or permanently alienated. Short of a revolutionary change in public policy,...

Among the obstacles to conservation should be included inappropriate types of property tenure which may cause “owners” to exploit non-specific natural resources at a faster rate than social welfare would warrant. As shown in Part II, such in appropriate tenure may burden society with a tendency toward depiction, a burden which the manager of the resource does not bear, because in acquiring rights to exploit completely a parcel, which are only a fraction of the whole rights to the use of the natural resource, he does not experience more than a fraction of the harm which his operations do to...

In addition to changing the system of resource tenure and enlightening the individual about the gains available to him from more conservative, resource use, a government may attempt to alter the degree of conservation on privately managed lands by taxation. A study of the effect of taxation on natural resource management involves not only the question of whether reduced taxes (and increased subsidies) encourage conservation, but also the question of whether there is a difference between the effects of changes in the different varieties of tax. It may be, indeed, that by merely changing the type of tax – leaving the...