The Economics of Natural Resource Scarcity and Implications for Development Policy and International Cooperation

Abstract

This paper analyses the problem of natural resource scarcity and its implications for economic development and international cooperation. We examine the meaning and measurement of resource “scarcity” and its implications for economic growth and development. The paper describes the conditions required for the efficient use of exhaustible natural resources and for optimal inter-temporal efficient paths and considers the consequences of uncertainty, risk, externalities, disequilibria and institutional constraints on the market’s ability to achieve efficient resource utilization. Particular attention is paid to the implications of the cartelization of natural resource industries and the disturbing tendency to use political rather than economic motivations as the basis for resource production and distribution decisions.

Keywords: Natural resource scarcity; cartels; OPEC; energy prices; economic development; non-renewable resources; efficiency

JEL Classification: Q3, Q4, L1, L41, D6, D8