Lecture 3 Flashcards
(32 cards)
What is natural capital?
The stock of natural products that contribute to human well-being. It can grow with investment or deplete without preservation.
What is natural resource economics?
The study of the flow of inputs from nature to humans, including technological, regulatory, and demographic factors affecting resources
What is sustainability
The ability of a system to maintain itself over time, ensuring future resource availability for generations.
What are the three types of natural resources
- Non-renewable: Finite resources like fossil fuels.
- Recyclable: Resources like water and iron, partially reusable.
- Renewable: Resources like fisheries and forests that replenish over time.
How does resource type affect management strategies?
Strategies depend on whether the resource depletes, can be recycled, or is naturally replenished
What are the two main categories of natural resource value?
- Use value: Direct use, either extractive (e.g., wood, oil) or non extractive (e.g., recreation)
- Non-use value:
Option value: Potential future use (e.g., biodiversity for medicine)
Existence value: Satisfaction from knowing a resource exists.
What is intertemporal efficiency in resource management?
It accounts for all future benefits and costs of today’s actions, ensuring resources are not depleted at the expense of future generations.
Why is discounting used in cost-benefit analysis?
Discounting values future benefits less than present ones due to factors like economic growth and the return on investment.
What are net social benefits?
Social benefits - social costs
Give examples of social benefits:
Food, energy, shelter, goods,…
Give examples of social costs:
Extraction costs, pollution, reduced future availability,…
Define Rivalry in terms of Goods and Services
If someone consumes one unit, there is less of the good left for others
Define Excludability in terms of Goods and Services
It is possible to exclude someone from consumption
Why are natural resources difficult to manage?
- Many natural resources are non-excludable, meaning it is difficult or impossible to prevent people from using them.
- They are considered common goods, and people focus on the total amount available rather than their individual share
- This leads to free riding, where individuals consume the resource without contribution to its preservation.
What is a free rider?
A person who benefits from a good or service without paying for it.
What are the two main problems caused by free riding in natural resource management?
- Under Investment: Insufficient contributions to maintaining resources
- Excessive use: Overexploitation due to lack of incentives to conserve
What is the “tragedy of the commons”?
Overuse of common resources occurs because individuals act in their own interest, depleting resources at the expense of others.
Give an example of the tragedy of the commons.
Farmers overgrazing a communal pasture, leading to its depletion.
Why is free riding a challenge in managing common goods?
It creates incentives for individuals to let others bear the costs of maintaining shared resources.
What solutions did Hardin propose for managing common resources?
- Privatization: Individuals bear full costs and benefits of resource use.
- Government management: Regulates access and usage.
Why might Hardins proposed solutions fail in practice?
Privatization can lead to conflics, and government management may suffer from corruption or enforcement issues.
In what contexts does cooperation in resource management become individually rational?
- When the resource is vital for survival, individuals invest in it even if others don’t
- If only combined efforts can maintain the resource, making free riding impossible.
- In repeated interactions where social punishment deters individuals from exploiting communal resources.
Why do private and public ownership often fail in managing natural resources?
Private ownership:
- Over-exploitation occurs if rights are based on extraction quantities
- Conflicts arise when private groups compete for ownership
- Depletion may be economically optimal for slow-growing species
State ownership:
- Lack of enforcement leads to illegal exploitation
- Corruption and elite privileges can undermine fair use.
- Complex regulations may discourage compliance
What are Ostrom’s 8 principles for successful community management of natural resources?
- Clearly defined boundaries
- Rules matching local needs
- Participation in rule-making
- Monitoring of behaviours
- Graduated sanctions for violators.
- Accessible dispute resolution.
- Recognition of community rights by authorities.
- Nested governance from local to broader levels.
