Some Issues in the Current Debate about Energy and Natural Resources

Economics has always contained an element of schizophrenia with regard to natural resources. The view that market forces should be left to equate the demand and supply of natural resources through changes in costs and prices glossed over the effects of market imperfections and the long lead times in developing new supply sources; but it was tenable as long as it could be assumed there was no practical limit to the total supply of natural resources which could be tapped. Increasing recognition that the earth’s resources are ultimately finite, combined with the expectation that world consumption will continue to expand at compound growth rates, throws doubts upon this sanguine view.