Date of Award:

1987

Document Type:

Dissertation

Degree Name:

Doctor of Philosophy (PhD)

Department:

Economics and Finance

Advisor/Chair:

Donald L. Snyder

Abstract

The issue of natural resource scarcity has so far been addressed in the literature on the basis of various measures such as the unit cost of production, the relative market price, and the shadow price of a resource. Although it has been recognized that there exists some kind of jointness (sometimes inseparable) between an extractible resource and its surrounding environment, none of the measures, either theoretically or empirically, have included this concern.

In order to extract and use a natural resource (e.g., coal) the environment (air, water, etc.) must also be used as a repository of the discharged wastes (e.g., sulphur oxides, nitrous oxides, particulates, etc.) . Moreover, if there is a mandated level of the environmental resource (e. g., clean air) that has to be maintained, then certain additional costs must be borne by society (firms utilizing the resource). Thus, in evaluating the scarcity of an extractible resource, the relative position of the environmental resource also must be evaluated. The present study has incorporated such jointness in the evaluation of the measure of resource scarcity.

The theoretical model has been developed in an optimal control framework. It has been analytically shown that this new measure of resource scarcity would indicate a different trend compared to earlier ones. The measure of resource scarcity developed in this study captures previous measures as special cases. In an uncertain world, when the impacts of use of an extractible resource on the environment is not known the stock size of the environmental resource becomes uncertain. It has been analytically shown that in a situation of uncertain environmental stock the scarcity indicator would indicate a relatively slower extraction compared to that of a deterministic world.

Empirical investigations in this study suggest that coal in use might be becoming relatively scarce if one considers the use of it in the electricity industry as the major use, compared to a situation where no environmental concerns are in effect.

Included in

Economics Commons

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