Scarcity and Growth Revisited, edited by R. David Simpson, Michael A. Toman, and Robert U. Ayres.
As an armchair observer and occasional user of economics, particularly environmental economics, it's always struck me that scarcity is a bit of an odd duck. It's central to everything I learned in graduate-level introductory economics. In public discussions, though, people coming from an avowed economics perspective often seem to downplay the importance of scarce resources, focusing instead on the ability of people and firms in a free market to innovate themselves away from dire scarcity.
The Scarcity and Growth books drop themselves squarely on the duck. The first, Scarcity and Growth, was published in 1963, followed by Scarcity and Growth Reconsidered in 1979. Since that time, we've had plenty of time to get comfortable in the neo-Malthusian v. Cornucopian debate. Scarcity and Growth Revisted seeks to plumb through some of the recent research on that tired debate, as well as report on an expanded concept of scarcity, the New Scarcity.
The New Scarcity deals with the market externalities that encroach on ecosystem functions—basically, the capacity of natural systems to absorb interruptions and waste. It's this capacity (to purify water, for example) that is considered to be the scarce or potentially scarce resource.
There is a lot of interesting reading in this collection, both on the New Scarcity and problems at the heart of the Old Scarcity Debates—the role and capacity of technological innovation to ward off civilizational crash or a run on corn tortillas. In fact, the book really packs it in. This review being a year late attests, I think, to its density*. Though I'd like to recommend it to everyone, it's not a book for the casual reader (self included).
SGR starts with an overview of the current state of knowledge on scarcity in general, with an examination of mineral resources. It moves into attempts to characterize resources in the New Scarcity economically—troublesome because not only is it difficult to attach dollar values to these resources, but often even physical measures are difficult to come by. Chapter 4 (Tilman and Polasky) looks at the factors that control the supply of some ecosystem services in a way that allows for trading them off for other goods and services: how does the capacity of a forest ecosystem to provide timber and potable water play between the two? They then consider how diversity in ecosystems affects the supply and value of three ecosystem services (primary productivity, carbon storage, and removal of nutrients from groundwater).
These are all great**, but the most interesting chapters are those that delve into the complex role that innovation plays in resource use. Ayres (chapter 7) looks critically at the hand-waveyness of technical progress (considered as “multi-factor productivity”) in neoclassical economics, finds it lacking, and proposes instead to consider the economy as a two-stage processor/converter or material resources. In the first stage, resources are converted into useful work, which is then used to convert raw materials into finished materials, products, and (eventually) non-material services.
However, technological change is not a gradual or homogeneous process. It is intermittent and narrowly specialized, operating in two modes: normal (which proceeds incrementally through accumulated experience and positive feedback loops) and radical (breakthroughs in competing types of technology). Radical progress results in sharp price decreases, which in turn increases demand and scale of production, both of which further depress prices.
In normal technical change, returns to research and development decline as the technology approaches its efficiency limits. In this sense and within normal change, both efficiency opportunities and innovation are themselves scarce resources.
Innovation as a scarce resource is also a theme sounded by Smulders (chapter 8), who looks at whether growth leads to faster depletion of resources or creates the resources necessary to clean up the environment. Here, rather than innovation within a single technology being a scarce resource, innovation is one activity among many, and innovation on one scarce resource (such as on climate-friendliness) may crowd out the capacity of firms to innovate in other areas.
Smulders also finds that the relationship between technological change and environmental degradation is highly ambiguous. Circumstances (and choice—as Ayres suggests, innovation is not evolutionary, since it often directed, either at the firm level or at the level of national and international policy) may dictate whether technological improvements are positive, neutral, or negative for environmental quality. Chief among the ways of understanding this relationship is, of course, the environmental Kuznets Curve. However, Smulders notes that evidence for the EKC is limited to local pollutants with an immediate health effect and that, moreover, the EKC may be a result of deliberate technological change, rather than a byproduct of growth.
That's about all I can pack in to this review. Here's the chapter list (PDF); if anyone is particularly interested in any one paper, I'd be happy to provide more specifics in comments.
Given the breadth of the topic and the book, and my own complaints thereof, I feel a bit presumptuous in wishing that an entirely different subfield were included. But that's how it is, and that's what I'm going to end on. Most of the book is, of course, concerned with production and firm behavior. However, there are, I think, interesting new developments on the consumption side. Chiefly, here I'm thinking of the research that Tim Kasser is doing on time affluence (as well as other happiness researchers), which seems like a natural fit to the direction that the New Scarcity is taking economics research. From the perspective of the individual, time may be the ultimate scarce resource.
Greg Claxton is a part-time urban planner and clean energy advocate in central Illinois. He writes on local clean energy issues at cesblog.org.
* Truly, 1000 words is a tight limit. I tried writing more efficiently by leaving out articles, prepositions, conjunctions, adjectives, verbs, even nouns, but none of my innovations really took.
** And I don't even get to mention my favorite chapter—C.J.M. Van den Bergh's “Evolutionary Analysis of the Relationship between Economic Growth, Environmental Quality, and Resource Scarcity.”
