Natural Resources as Capital
An introduction to the concepts and tools of natural resource economics, including dynamic models, market failures, and institutional remedies.
This introduction to natural resource economics treats resources as a type of capital; their management is an investment problem requiring forward-looking behavior within a dynamic setting. Market failures are widespread, often associated with incomplete or nonexistent property rights, complicated by policy failures. The book covers standard resource economics topics, including both the Hotelling model for nonrenewable resources and models for renewable resources. The book also includes some topics in environmental economics that overlap with natural resource economics, including climate change.
The text emphasizes skills and intuition needed to think about dynamic models and institutional remedies in the presence of both market and policy failures. It presents the nuts and bolts of resource economics as applied to nonrenewable resources, including the two-period model, stock-dependent costs, and resource scarcity. The chapters on renewable resources cover such topics as property rights as an alternative to regulation, the growth function, steady states, and maximum sustainable yield, using fisheries as a concrete setting. Other, less standard, topics covered include microeconomic issues such as arbitrage and the use of discounting; policy problems including the “Green Paradox”; foundations for policy analysis when market failures are important; and taxation. Appendixes offer reviews of the relevant mathematics. The book is suitable for use by upper-level undergraduates or, with the appendixes, masters-level courses.
Larry Karp shows how treating natural resources as economic assets can lead to important and far-reaching analytical insights for a wide range of natural resource problems and policy situations. This will be an essential text for students wishing to study natural resource economics for years to come.
Edward B. Barbier, Professor, Department of Economics, Colorado State University; author of Capitalizing on Nature: Ecosystems as Natural Assets
The daily news communicates scientists' concerns about global climate change and about the advancing depletion of many fish stocks and water supplies. Coupling crisp mathematics to clear explanations, Larry Karp demonstrates how the need to manage resources for tomorrow should affect today's decisions and policies.
Derek Lemoine, Associate Professor of Economics, University of Arizona
Larry Karp's book is an excellent introduction to the important topic of natural resource economics. The book covers a wide range of issues, employing the same methodology throughout, and the math skills required of the readers are kept at a minimum.
Michael Hoel, Professor Emeritus, University of Oslo