Environmental Resource Management: Lecture 1 Page 1 of 11

ENVIRONMENTAL RESOURCE
MANAGEMENT
THEORY OF RESOURCE MANAGEMENT
Lecture 1: The allocative characteristics of environmental resources

a. Which types of environmental resources pose the most serious allocative problems in terms of
sustainability?

The importance of systems of exchange

Economic systems have developed over time for the express purpose of allocating resources. Techniques
for allocating resources have emerged like a process of natural selection, with those that work becoming
incorporated into the economic system and those that fail being eventually rejected.

This process has been a major factor in the gradual improvement in living standards. Nowadays, the
most highly developed nations enjoy material standards inconceivable to their forebears at the turn of
the century, and still well beyond much of the rest of the world.

Much of this is due, not simply to greater exploitation of the world's resources, but to more efficient
systems of exchange, leading to better allocation of resources.

This can be seen by considering how easily a country can collapse when its economic system fails to
function, despite a super-abundance of resources. The classic example of this situation was provided by
the USA during the Great Depression of the 1930s.

A more recent example is provided by the contrasting fortunes of Japan, a country with few natural
resources, and Russia, a country with immense supplies of natural resources.

While the Japanese now have one of the highest per capita levels of national income in the world, and
the longest life expectancy of any nation, the Russians have seen their living standards plummet and life
expectancy fall for the past thirty years.

So efficient systems of exchange are central to economic and social well-being. Owning a lot of
resources will not ensure prosperity, unless at the same time there is a system of resource
allocation available to make efficient use of these.

We need to reconsider some of the ways in which we allocate resources because of concerns about long
term sustainability of environmental resources

Despite rapid improvements in material well-being, which are rapidly spreading across the world, the
rates of economic growth which have supported these improvements since the 2nd World War have
drawn attention to the demands we now place on our environmental resources.

Questions have been raised about the long term sustainability of this economic progress, whether there
is a limit to material improvements, and whether our current systems of exchange can recognise any

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 2 of 11

limits before we run up against the buffers.

One of the first to make this point was the economist, Kenneth Boulding, who published an article in
1966 entitled "The coming spaceship earth" (reprinted in Markandya 1992, op.cit.).

Boulding argued that for the past century people had regarded environmental resources as if they
operated in an open system, which he characterised as a "cowboy" economy. In such a view, resources
were regarded as virtually limitless, with the supply increasing to meet growing demand simply by
pushing the frontier further forward.

Under this type of paradigm, success could be measured by the ability of nations to maximise their
outputs of goods and services, with residuals being dumped outwith the system.

In reality, Boulding pointed out, the earth was a closed system as far as material inputs were concerned,
with only energy flows being exchanged outside its confines. Under these circumstances we should
regard our planet much more like a spaceship, and face up to the fact that we operated within a closed
system in which we could neither create or destroy matter.

Within this new paradigm, Boulding went on to argue, we could not ignore our residues. As we
destroyed our highly structured material resources to create economic growth, so we increased the
planet's entropy levels. The appropriate measure of success for Boulding under such circumstances was
not the maximisation of material outputs. It should instead be the extent to which we could minimise the
inputs we required to sustain high living standards.

Allocative classification of environmental resources

In order to understand exactly why environmental resources create problems for systems of exchange, a
good place to start is by classifying environmental resources according to their allocative characteristics.

Diagram 1 provides an appropriate system of classification for this purpose. Environmental resources
are sorted on the basis of three sets of criteria in this diagram.

Renewability

The first criterion is the question of renewability. If the rate of regeneration of any environmental
resource is significant, we can classify that resource as being renewable. Otherwise, it is classified as
non-renewable.

A non-renewable environmental resource is simply a finite stock, which can never be replenished. Any
use of that stock will always diminish the level that remains. There is no such thing as a sustainable rate
of use of a non-renewable stock.

So the only allocative question asked of any system of exchange with regard to such resources is: what
is the optimal rate of depletion? In principle, the solution to this allocative problem is to choose a rate
of depletion which allows us to replace the stock just as it is used up with a sustainable alternative.

As we shall see, however, the way in which our current systems of exchange tackle this problem raises
considerable doubts over whether we are truly providing sufficient incentives to look for sustainable
alternatives to non-renewable resources.

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 3 of 11

Exhaustibility

The second criterion in any allocative classification of environmental resources is exhaustibility. We

can draw a distinction for the purposes of resource management between exhaustible and non-
exhaustible renewable resources.

This distinction between exhaustible and non-exhaustible renewable resources has crucial implications
for allocative systems. It relates to the way in which a resource is made available to us, and the way in
which we can use it.

Some renewable resources, such as wind, tidal and solar flows, are strictly "non-exhaustible". Whatever
demands humans make on them, they cannot use these environmental resources up.

Part of the reason for this non-exhaustible characteristic is that use of supplies of this type of resource by
one group of people does not preclude other groups from benefitting from the same supply of the
resource. In technical terms, these resources are "non-exclusive" in character.

More fundamentally, the origin of these resource flows is extra-terrestrial, and not under human
influence or control.

So these types of renewable resource flows do not pose allocative problems. Whatever the level of
human demands on them, their availability cannot be affected by exhaustion. There is therefore no need
to be concerned about regulating access to or use of this type of resource, because in economic terms it
is not scarce.

We can simply allow people to use as much as they wish, without being concerned about the long term
supply implications. This is the only type of resource to which the "cowboy economy" of Boulding's
article is still pertinent.

Our concerns about sustainable uses of environmental resources therefore focus on the remaining
category: those resources which are both renewable and also exhaustible. It is with this type of
environmental resource that we have the choice of selecting a rate of usage which will allow us to
consume supplies for an indefinite period, or a rate which will result in the disappearance of the resource
within the foreseeable future.

This is the category of resources, in other words, in which there is a real allocative choice of
whether to act in a sustainable or unsustainable fashion, and on which the capacity of our systems
of exchange to identify and act on that choice must be tested.

This category of environmental resources is made available to us as a flow from a renewable but
exhaustible terrestrial environmental stock. The phrase "harvesting the stock" is often used to illustrate
that we are making use of a yield from the stock which can be replenished.

The rate at which we decide to harvest the yield of any renewable but exhaustible environmental stock
will determine whether we actually exhaust it. If we take too large a harvest, then the stock is likely to
diminish to the point at it may become non-viable and disappear for good.

The type of replenishment

The risk that this will happen will be influenced by the final criterion in our allocative classification of

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 4 of 11

environmental resources: the type of replenishment.

Some forms of environmental resources can be replenished in relatively short periods of time through
physical as well as or instead of biological processes. Physical processes of replenishment are
important, for example, in dealing with soil structures and fertility levels, aquifers, the earth's
atmosphere and ozone layer, and the assimilative and waste processing capacities of our environmental
systems.

All these types of renewable but exhaustible environmental resources have a physical capacity for
renewal. This distinguishes them from environmental resources in which the capacity for renewal is
purely or predominantly biological, such as fish stocks and forests, and other flora and fauna and their
related ecosystems.

In terms of allocative problems, exhaustible resources for which physical as well as or instead of
biological renewal is possible should prove more resilient to the demands humans place on them. They
should offer a greater margin of warning about unsustainable levels of use, so that systems of resource
management which are inadequate can be spotted and improved before irretrievable damage occurs.

It does not follow that these warning signs will be acted upon, even when we are dealing with this more
resilient category of exhaustible environmental resource. However, if an exhaustible environmental
resource only has a biological capacity for renewal, the margins of warning are likely to be less
generous, and the signs of exhaustion are likely to be far more difficult to reverse.

For this reason, the shortcomings of our systems of exchange when allocating environmental resources
are likely to be felt most keenly, and create most concern, in those categories of environmental resources
the sustainability of which is most vulnerable to exhaustion: stocks of environmental resources which
rely on biological processes of replenishment.

b. What characteristics of environmental resources pose the main allocative difficulties in achieving
sustainability?

There are four groups of characteristics shared by many environmental resources which create particular
difficulties for allocative systems when we consider questions of sustainability. These can be
summarised as follows

l irreversibility
l uncertainty
l market externalities
l absence of property rights.

Irreversibility

We have already referred to the problem of irreversibility in passing when classifying environmental
resources.

Consider how we tackle the issue of allocative mistakes in general. In dealing with reproducible stocks
of assets produced by humans, such as buildings, infrastructure, plant and equipment, we know that
what is destroyed or wrongly constructed can eventually be replaced or corrected.

The short period it took for countries to recover from the devastation of their capital assets after the 2nd

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 5 of 11

World War illustrates the power of economic systems to replace and renovate their reproducible capital
assets.

So not much concern is shown about making sure that the correct decisions are made to begin with when
considering how to invest in new reproducible capital assets. The allocative system which manages
these processes of capital investment allows individuals, companies and governments the freedom to
make mistakes, which can be corrected with the benefit of hindsight.

Under a market system, the allocative process rewards those who have the good judgement or luck in
making the right decisions about new reproducible capital assets and penalises those who get it wrong.
The rewards and penalties involved are a combination of financial profits and losses, along with other
economic and political prizes.

Suppose we apply the same trial and error approach to the use of exhaustible environmental assets.
Because of the nature of such resources, we might find ourselves in serious trouble. If the decision we
take is wrong, and we incorporate a major error of judgement, we might completely wipe out our stock
of the environmental asset, with no possibility ever of replacing it.

Under these circumstances, the penalties faced by not only ourselves but future generations for making
wrong judgements about such resources seems to be much too high to leave it to trial and error.

A similar problem applies in the decisions we take about depleting non-renewable resources. If we
choose too high a rate of depletion, we may end up running out of essential supplies of non- renewable
resources before we have the opportunity of developing sustainable substitutes, and there would be little
we could do about this.

The market rewards for successful judgements and penalties for wrong decisions when applied to
environmental resources seem to be rather ineffective when the decisions involve irreversible changes in
resources.

Moreover, given that we live in what in material terms is a closed system, errors of judgement in the use
of environmental resources do not simply mean that we lose the power to take better decisions later.
These errors mean that we inexorably increase the entropy in the system, and face increasing problems
in dealing with residuals and waste products. In a real sense, when dealing with environmental
resources, there is only a one-way street down which we can go, so we had better make sure to choose
the right direction and the right speed beforehand.

The precautionary principle

For all these reasons, a principle is increasingly being adopted by policy makers in taking allocative
decisions which involve environmental resources which are non-renewable or exhaustible.

This principle was first adopted by German policy makers, where it is known as the
VORSORGEPRINZIP. In the English speaking world, we have translated the term into "the
precautionary principle".

The precautionary principle is based on the idea of the carrying capacity of ecosystems, and the need to
error on the side of caution when determining the extent to which scarce environmental resources can be
used for economic development.

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 6 of 11

Ecologists have taught us that as we make greater demands on the natural environment, we reduce its
resilience by lowering its complexity and diversity. In the process, we reduce the environment's ability
to cope with the demands we place on it as we produce more material goods for our needs.

Since it is normally impossible to establish beforehand what the threshold of any ecosystem is below
which we reduce its viability and destroy it, the precautionary principle argues that we should always err
on the side of caution in allocative decisions about the environment and environmental resources.
Otherwise we can offer no guarantee that our use of such resources will be sustainable.

Uncertainty

Economists recognise two types of uncertainty as affecting resource allocation. The first occurs in a
situation in which it is possible to assign a range of probable outcomes to an event, with a quantification
of how likely each outcome is. This type of probabilistic uncertainty is normally termed risk. It is at the
heart of many profitable careers in the financial and insurance markets.

The other type of uncertainty applies to outcomes for which no probabilities can be calculated. This is
termed true uncertainty.

If we consider how people deal with risk and uncertainty in making allocative decisions, we shall see
why this poses a problem when determining the use of environmental resources.

An obvious way of dealing with risk and uncertainty is to weight decisions against outcomes which are
more uncertain or risky and in favour of those which are less risky and uncertain. Since outcomes are
less certain and more risky, the more distant in time from the present they are, this type of weighting
tends to favour outcomes which are nearer in time and penalise outcomes which occur further ahead in
time.

The logic here is that the nearer to the present day any outcome is, the less uncertain it is likely to be,
and the lower will be the risk in committing resources to it. This approach is revealed most clearly when
we consider the structure of interest rates in financial markets.

Interest rates provide a measure of the return on any financial asset, and they also therefore indicate the
price of using or borrowing financial assets.

The less risky the use to which any financial borrowing is put, the shorter the period for which such
borrowing is needed, the lower the price or interest rate is likely to be. So financial markets use interest
rates as a measure of risk and uncertainty, increasing the costs of borrowing and the returns expected on
assets the longer the period needed to realise the investment and the less certain its outcome is.

How does this market based approach apply to allocative decisions involving the use of environmental
resources?

We can illustrate the relationship between financial measures of risk and uncertainty and the allocation
of environmental resources in two ways, the first of which anticipates slightly our later discussion of the
meaning of sustainability.

Sustainability involves, as we shall see, taking decisions which are not just for the benefit of present
generations, but which also protect the interests of future generations.

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 7 of 11

However, the structure of market interest rates favours the types of investment favoured which produce
rapid returns, and discriminates against investments which make returns only in the distant future.

When it comes to protecting the environment by investing in measures to prevent environmental damage
and preserve environmental resources, many of the projects aimed at this can only provide returns which
will be realised far into the distance. A good example are investments designed to tackle global
warming. These may not provide tangible returns for over a century, but if we neglect the opportunity to
make these investments now, the cost later may be far higher.

The problem is that all estimates of costs and benefit for tackling global warming are subject to
considerable uncertainty. When we take account of this by discounting future returns by high market
rates of interest to calculate the present value of these returns to investors, such investments are simply
not financially worthwhile. They are too risky, too uncertain for present commercial investors, even
though the alternatives may be far more damaging for investors in the distant future.

In other words, because of uncertainty the market tends to discriminate against investments
designed to enhance the future sustainability of environmental resources.

Optimal rates of depletion for non-renewable resources

There is another way in which we can illustrate how the way in which markets tackle the allocative
problem of risk and uncertainty affects the way in which we use environmental resources.

This entails introducing possibly the most famous allocative rule ever developed for environmental
resources: Hotelling's Rule.

Hotelling's rule offers a means of determining the optimal rate of depletion of non-renewable resources.
It was first developed in an article by Harold Hotelling published in the Journal of Political Economy in
1931.

Hotelling addressed the question: what should be the optimal rate of depletion of the stock of a non-
renewable resource? The answer he offered related the returns which could be realised for such a
resource to the returns which might be realised from any other asset, such as financial investments on
the stock exchange.

Hotelling argued that from the point of view of efficient resource allocation, oil reserves could simply be
regarded as a capital asset. The value of this asset could be immediately realised by pumping oil up for
sale. Alternatively, it could be accrued for future realisation by leaving it in the ground in anticipation of
a rise in the future market value of oil (capital appreciation).

The decision as to whether to pump oil or allow it to appreciate in the ground should be determined by
comparing the returns from either alternative to those which could be gained from other assets. The
optimal rate of depletion of an oil reserve, Hotelling illustrated, would be achieved when the rate of
capital appreciation on oil matched that of other assets with a similar risk profile.

The reason for this was that any earnings from sales of oil could simply be reinvested in such other
assets. Suppose, for example, that to start with the rate of capital appreciation of the oil reserves was
inferior to the return to be gained on alternative comparable assets.

This should make the owner of the oil reserves choose a higher rate of depletion of his reserve, ie a

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 8 of 11

higher rate of pumping. This follows from the fact that realising the value of oil and reinvesting the
proceeds would provide a better return than leaving the oil in the ground.

Other things equal, an increase in the rate of depletion of the oil reserve would depress current oil prices
to the point at which the return to be gained by realising the current value of the asset no longer
exceeded the return from keeping it in the ground. At this point, an optimal rate of depletion of the oil
reserve would be re-established.

As Hotelling and subsequent researchers in this field went on to prove, the actual determination of
optimal rates of depletion of non-renewable environmental resources will be complicated by additional
considerations, such as extraction costs and the availability and price of substitutes.

Nevertheless, Hotelling's key finding remains, that the principal determinant of the optimal
depletion rate is the rate of return on comparable assets or, in other words, the market rate of
interest for such assets.

So the economic solution to the appropriate rate at which non-renewable environmental resources are
used up relies on market determined rates of interest. These are the very same allocative tools which we
have already questioned when looking at how to determine which investments are likely to offer
environmental sustainability.

Now if interest rates were stable and predictable, their weakness for the purposes of long-term
investments designed to improve environmental sustainability might not be a major concern in using
them to determine optimal rates of depletion of non-renewable environmental resources.

However, many of the highest salaries earned in financial markets are the result of good judgement on
the future movements of interest rates in what is an extremely volatile and unpredictable set of markets.

So market rates of interest by themselves do not seem best suited to ensuring that the rate at which we
deplete a non-renewable environmental resource is such that when it eventually runs out we shall be able
to find a long term sustainable substitute for it. Remember, when it comes to environmental resources,
we do not normally have the luxury of trial and error, and of going back to start again.

Market externalities

A third characteristic of environmental resources which poses a problem for systems of exchange is the
existence of significant market externalities in many cases.

Technically, this means that the price at which markets trade the environmental resource - if indeed a
market exists at all (see below) - fails to reflect all the costs and benefits to society of using that
resource. Since the market price is the mechanism by which resources are allocated in market exchange
systems, failure to incorporate in the price all the costs and benefits to society of using the resource
means that the information on which decisions are made about the level of use is defective.

Diagram 2 illustrates the problem. It shows a normal downward sloping demand curve for the resource,
with more being demanded at a lower price. Against this is an upward sloping supply curve, showing the
increasing private costs of extra supplies, and the higher price needed to bring these to market.

The market clearing price will settle at P, at which point OQ of the product, recycled paper, will be
traded. At this price, the value to the consumer of the final unit traded will just equal the private extra

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 9 of 11

cost of producing it.

However, this product creates significant levels of effluent, which are discharged into the atmosphere
and water courses, with the costs being borne by the local community rather than the producer. Once
these costs are added to the producer's private costs, the supply curve is shifted upwards from S to
S1,the difference between the two curves indicating the environmental externality.

If the market were able to incorporate this externality into the price, the new traded price would be P1
and the quantity of the product traded would fall to OQ1.

As you will discover later in the course, there are various forms of taxation, licensing and regulation
which attempt to bring home to producers the full costs of their operations, where significant
externalities are involved. European Union legislation is based on the principle of "making the polluter
pay", and anything which succeeds in doing this is given the technical term "internalising an
externality".

Although in principle, externalities can include benefits as well as costs, the accepted view is that when
it comes to the allocation of environmental resources, the effects of external costs outweigh the effects
of external benefits, resulting in excessive use of these resources.

In this respect the classic example relates to global warming. In this case, the external costs created by
ignoring the consequences to the climate of burning fossil fuels are imposed throughout the planet. This
makes regulation particularly difficult, since however effectively individual countries may control their
carbon emissions and reduce their consumption of non-renewable energy, this will only prove effective
if they can get everyone else to do the same.

Global externalities highlight the need to internalise externalities of all sort if we are to realise a
sustainable use of the earth's resources.

Absence of property rights

Even if the use of environmental resources was not affected by the presence of externalities to the extent
that it is, the allocation of environmental resources by market processes can be blocked by another
characteristic which they often display: an absence of property rights.

This means at its simplest that for many stocks of environmental resources no-one claims any ownership
rights, either or public. To see why this should cause allocative problems, consider some examples of
the difficulties created by a lack of property rights.

Diagram 3 provides a very straightforward illustration of the problem. We can suppose that the supply
of an environmental resource is fixed at Q*, because this is the maximum sustainable yield from a
renewable stock. The fixed supply is illustrated by a vertical supply curve SQ*, which indicates that the
supply is unresponsive to changes in price.

Against this supply curve we plot a normal downward sloping demand curve, which indicates that at
lower prices more will be demanded of the resource. Given a market for the product, a price will be
established which matches demand with supply. In this case, the price would be P*.

Notice that the market price acts as a rationing system, an allocative device. Suppose the demand for our
resource rose, which we could illustrate by shifting the whole of the demand curve upwards. Since

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 10 of 11

supply is fixed at Q*, no more would be supplied by owners of the resource keen to ensure its
sustainable use, so price would simply rise to a level which would squeeze out excessive demand and
reduce it to Q*.

We have already seen that markets may not establish a price which fully reflects the costs and benefits to
society of using the resource, but nevertheless the very fact that markets can establish a price also means
that the price will act to discourage excessive use as demand for the resource rises.

Consider instead what is likely to happen if the resource is provided as a free good, in the sense that no-
one lays claim to its ownership and people are free to consume as much of it as they like without charge.

Such a situation applies to a whole range of environmental resources, from boreal temperate or tropical
forests, which are offered free to those who wish to clear the land and settle, to millions of acres of
American federal ranching lands which are provided at a negligible rent to ranchers, and to deep sea
maritime fisheries, which lay outside the territorial claims of countries, open to anyone to fish. It also
applies to environmental attractions, many of which are available at no charge to anyone who wishes to
visit them.

This "freeness" is illusory: these resources are in fact scarce, and excessive consumption will lead to
their damage or possible destruction. But no market mechanism exists to try and match demand to
sustainable supply, resulting in over-consumption.

Diagram 3 illustrates this by showing that in the absence of a price, demand for our resource will
increase upto Qo, the level of demand for the resource when its price is zero, the point at which
everyone who wants to consume the good is satisfied.

In the absence of property rights and a market, the likelihood is that the environmental resource will be
consumed at an excessive, unsustainable rate. Moreover, if open free access occurs in allocating
environmental resources which are exhaustible biological stocks, there is a very real possibility that
these stocks will eventually completely disappear.

The classic example in this respect relates to the biological stocks of the oceans, including fish species,
whales and other marine mammals. Because of free access, over-fishing is bound to occur, with no-one
concerned to ensure that the stock itself is preserved for future generations.

Fishermen, who realise what is happening, are powerless to stop themselves ruining their own
livelihood, because none of them have any property rights to defend when it comes to the high seas: here
fishing is literally a "free-for-all". Consider the history of herring catches in the North Sea after the 2nd
World War. The war itself offered the fishing stocks time to recover and build up, so that in the 1950s
the North Sea yielded bumper catches of herring, sufficient to encourage very rapid increases in fishing
fleets designed to exploit these stocks.

The average annual catch of adult herring in the North Sea in the 1950s was between 600,000 and
700,000 tonnes. In the 1960s, industrial fishing techniques raised catches initially to some 900,000
tonnes per year and with the advent of Norwegian purse seiners in the mid-1960s to 1.4 million tonnes
per year. Because of free access, the maximum sustainable catch in the North Sea had by this time ben
exceeded, more immature fish were being caught, and the stocks of herring rapidly declined. By the
mid-1970s, catches had fallen to less than 500,000 tonnes per year, and at present herring stocks in the
North Sea are still extremely marginal, with a ban on fishing for herring in many parts.

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004
Environmental Resource Management: Lecture 1 Page 11 of 11

Some conclusions about difficulties in allocating environmental resources

In this lecture, we have seen how a classification of environmental resources according to their
allocative characteristics can help us understand why they pose difficulties for any allocative
management systems. This led us to draw two overall conclusions:

l firstly, that simple reliance on market mechanisms to ensure sustainable use of environmental
resources is likely to prove unsuccessful, and to produce results which may be both damaging and
irreversible.

and

l - secondly, that the absence of any form of property rights or ownership is also likely to encourage
unsustainable use of environmental resources.

This suggest that what is needed for effective management of environmental resources is a system which
can both supplement the shortcomings of markets and substitute for their role when they are absent.

This lecture has concentrated on what economists term "micro-economic issues": the allocation of
existing levels of resources amongst competing uses. In the following lecture we shall turn our attention
to "macro-economic issues" and consider how the overall demand for environmental resources is
determined by the processes of economic growth.

http://www.trp.dundee.ac.uk/courses/lecnotes/lecture1.html 8/5/2004