Infinite desires in a finite world: Scarcity and its socio-economic implications

Natural resource scarcity has been making a resurgence as a dominant theme in recent economic writings. Most of the papers on this subject, however, have been narrow in their scope— discussing the issue mainly from a specific viewpoint or ideological stand. This paper attempts to give a balanced treatment to three economic positions (the traditionalist, the revisionist, and the unorthodox economist) taken toward natural resource scarcity. As such, the main objective of the paper is to present and analyze the basic arguments that have been advanced by the proponents of these three positions. It is the author's intent that this approach will help clarify the main factors that have been the source of disagreements among economists over the probable causes and ramifications of societal problems emanating from scarcity and in so doing provide a clearer perspective for prudent action.     

Working time reduction and employment in a finite world*

We study the consequences of a working time reduction (WTR) in a growth model with efficiency wages and an essential natural resource (natural capital), and in which technical progress cannot reduce the resource content of final production to zero. We show that if natural capital is scarce enough, a WTR increases the long-term levels of the hourly wage and employment. A numerical analysis of the transitory impacts of a WTR confirms that when natural capital is scarcer, a WTR increases employment more and the hourly wage less, with a less negative initial impact on output.     

Travel patterns and environmental effects now and in the future:: implications of differences in energy consumption among socio-economic groups

Travel patterns among different socio-economic groups in Sweden are investigated. It is shown that elderly persons, persons with low incomes and women in general do not travel extensively. Middle-aged persons, persons with high incomes and men travel much farther. Cars are the dominant transportation mode for all population groups. Aeroplanes are used mostly by high-income earners and men, while public transportation is mostly used by young people and women. Energy consumption for the different travel patterns differs substantially. Men with high incomes consume the most energy, with 94 000 MJ during one year, while elderly women consume 12 000 MJ. When compared to a calculated sustainable level of energy consumption for travel, most population groups are in excess. The level for sustainable energy consumption is calculated based on an assumed global potential for renewable energy of 360 EJ per year, divided equally among the global population. A certain share of this energy potential is supposed to be used for travelling. A scenario for 2020 is presented in which vehicle energy efficiency has increased and travel patterns have changed from what they are today. Sustainability can only be reached when both travel patterns and vehicle technology have changed radically. Differences in energy consumption for travel due to age and gender are likely to remain in the future. Scientific knowledge from the social domains seems to be important for devising efficient strategies for a sustainable society. Current focus on policy measures has been mainly on technical issues.     

Marx and Resource Scarcity: An Institutionalist Approach

Turkey has recently reshaped its own institutional structure by establishing Independent Regulatory Agencies (IRAs). However, the political authority has not desired to delegate the political property rights to IRAs. Although IRAs is de jure established, the political conflicts occuring during the evolution of the traditional-patrimonial state to the regulatory state de facto impede IRAs to institutionalize. This paper observes recent policy changes during the transition and lessons from the energy regulation in Turkey. So, the paper reveals whether the change in the regulatory institutional structure of Turkey is an effective policy in terms of transition to the institutions of capitalism.     

Potential socio-economic implications of future climate change and variability for Nigerien agriculture: A countrywide dynamic CGE-Microsimulation analysis

This study explores the potential economic and social effects induced by a possible future deterioration of weather conditions on Niger's agriculture. Our scenarios over a 25 year period rely on both long term climate change deterministic features and climate variability stochastic features which take into account a higher than normal frequency of severe droughts. Using a microsimulated Dynamic Recursive Computable General Equilibrium model, we show how a long run mean decrease in main crop yields could adversely affect growth, poverty and food security in the country and how more severe drought would worsen these negative effects. However, we also show that there would appear to be some room for manœuvre for coping strategies for Niger such as improving the rural road network, adopting modern crop varieties or, to a lesser extent, extending irrigation capacity.     

Skills,Tasks and the Scarcity of Talent in a Global Economy

The scarcity of talent is a tremendous challenge for firms in the globalized world. This paper investigates the role of labor market imperfection in open economies for the usage of talent in the production process of firms. For this purpose, I set up a heterogeneous firms model, where production consists of a continuum of tasks that differ in complexity. Firms hire low‐skilled and high‐skilled workers to perform these tasks. How firms assign workers to tasks depends on factor prices for the two skill types and the productivity advantage of high‐skilled workers in the performance of complex tasks. I study the firms’ assignment problem under two labor market regimes, which capture the polar cases of fully flexible wages and a binding minimum wage for low‐skilled workers. Since the minimum wage lowers the skill premium, it increases the range of tasks performed by high‐skilled workers, which enhances the stock of knowledge within firms to solve complex tasks and reduces the mass of active firms. In a setting with fully flexible wages trade does not affect the firm‐internal assignment of workers to tasks. On the contrary, if low‐skilled wages are fixed by a minimum wage, trade renders high‐skilled workers a scarce resource and reduces the range of tasks performed by this skill type with negative consequences for the human capital stock within firms. In this case, trade leads to higher per‐capita income for both skill types and thus to higher welfare in the open than in the closed economy, whereas – somewhat counter‐intuitive – inequality between the two skill types decreases, as more low‐skilled workers find employment in the production process.     

Economic and management implications of technological advances in the world steel industry

This article reviews recent and prospective major technological innovations in the world steel industry and assesses their probable effects on the production, cost, and export capabilities of established as well as of newly developing steel producing areas.     

Scarcity in the Danner-MeeksForum exchange: Supplying the demand for clarity

The dialog on scarcity in the Fall 1995 issue of the Forum exemplifies the problems inherent in cross-disciplinary communication. Careful analysis of this dialog between Peter Danner and M. Douglas Meeks reveals an equivocal use of the crucial term in question: “scarcity.” By pointing out these various shades of meaning and demonstrating the negative effects of linguistic confusion on the Danner-Meeks dialog, this article seeks to show how clarity and precision in the use of the term “scarcity” can open important avenues for further interdisciplinary reflection on this fundamental economic principle.     

Scarcity in the Danner-MeeksForum exchange: Supplying the demand for clarity

A message coming from the popular culture in recent years has been that a rise in wages in an occupation brings forth not only more workers but better workers as well. In this paper I present reasons for doubting this claim and for suspecting that the very opposite may be true. The higher an agent's minimal acceptable wage in occupation A, the more likely it is that other job opportunities exist. To the extent that this signals other talents which in turn raise the likelihood of competence in occupation A, the “better” such a worker might be assumed to be. I argue that largely overlooked is the possibility that an agent may be unwilling to work at the lower wage because of a low level of personal satisfaction or because of an insufficient belief in the work’s importance. I conclude that it is the person who is willing to work at the low wage who is more apt to achieve satisfaction and believe in the signficance of the work, and that, absent empirical evidence, it is therefore not correct to say that higher wages bring forth better workers.     

Evolution of the Corporation in the United States: Stabilized Scarcity and Vested Interests

The widening of markets beginning in the late nineteenth century in the United States involved changes in the financial and legal institutions supporting production for large-scale markets. The evolution of the corporation under these circumstances reflects the role of the legal system in formulation of formal rules which favor vested interests. As Thorstein Veblen said, “A constitutional government is a business government.”

This article examines the co-evolution of the legal system and the economic system as they relate to the merger movement at the turn of the twentieth century, the increased use of the corporate form, and the emphasis on pecuniary values over production to secure stabilized scarcity in the midst of cutthroat competition and deflation. The resultant financialization of the economy which continues today was reinforced by such legal rules as the Fourteenth Amendment’s protection of property, including intangible property, and the Rule of Reason accommodating some instances of monopolization. These stabilization policies have secured the rentiers’ return at the cost of the long term health of the national economy. John R. Commons’ observations on artificial selection and the use of law to make capitalism better offer a solution through laws regulating the detrimental aspects of financialization.     

Trade-offs between conservation and socio-economic objectives in managing a tropical marine ecosystem

Understanding the trade-off relationships between ecological, economic and social objectives is important in designing policies to manage or restore ecosystems. Using the northern South China Sea (NSCS) as a case study, we explore the trade-offs between conservation and socio-economic objectives in managing fisheries in tropical marine ecosystems. Using a numerical optimization routine and ecosystem modelling (Ecopath with Ecosim), the study shows that current management of the NSCS is sub-optimal both in terms of conservation and economic objectives. Therefore, improvement in both conservation status and economic benefits can be achieved by reducing fishing capacity. However, the implementation of conservation plans may be hindered by the reduced number of fisheries-related jobs and the lack of alternative livelihoods. Similar trade-offs are apparent in many tropical marine ecosystems. Thus, this paper supports claims from previous studies that solving the alternative livelihood problems appears to be a priority for improving management and conservation in these ecosystems. A buy-back scheme that is funded by fishers might be effective in reducing fishing capacity. However, public funds are required if management objectives focus strongly on conservation. This might be justified by the direct or indirect benefits to society that could be provided by well-conserved ecosystems. This study highlights the conflict between maximizing conservation and social objectives, although win-win solutions between conservation and economic objectives may be possible.     

On behavioral complementarity and its implications

We study the behavioral definition of complementary goods: if the price of one good increases, demand for a complementary good must decrease. We obtain its full implications for observable demand behavior (its testable implications), and for the consumer's underlying preferences. We characterize those data sets which can be generated by rational preferences exhibiting complementarities. The class of preferences that generate demand complements has Leontief and Cobb-Douglas as its as extreme members.     

Analysis of the energy access improvement and its socio-economic impacts in rural areas of developing countries

Access to modern energy is one of the most basic requirements for development. In rural areas of developing countries, there are a large number of people who do not have access to LPG and depend on traditional biomass such as wood, crop, and dung for cooking. In addition, energy has numerous and complex links with poverty reduction. Therefore, it is important to estimate the impacts of energy access improvement on socio-economic situation in the rural areas of developing countries quantitatively. This study focuses on socio-economic impacts of cooking demand through changes in stoves adopted by the rural households. We have developed an energy-economic model of rural areas in India to analyze the links between energy, income, and health hazard, applying both opportunity cost for using fuelwood and exposure to Resipirable Suspended Particulate Matter (RSPM). As a result of the analysis, there is a positive relation between the opportunity cost and the average RSPM exposure of women in the rural areas. Following to increase in the opportunity cost, that is, income, the cost of an improved wood stove becomes relatively lower first than that of a traditional wood stove, and then a gas stove attains price competitiveness. It is achieved that the average RSPM exposure is below the WHO and Japanese criteria for Suspended Particulate Matter (SPM), 190 and 100 [μg/m³], at the opportunity cost of US$9 and 15/GJ, respectively.     

Cooperation in a risky world

We offer a novel investigation of the effect of environmental risk on cooperation in the Voluntary Contribution Mechanism. Our baseline is the standard setting, in which the personal return from the public good is deterministic, homogeneous, and publicly known. Our experimental treatments alter this classic design by making the marginal per capita return from the public good probabilistic. In the homogeneous risk (HomR) treatment, the random draw is made for the whole group, whereas in the heterogeneous risk (HetR) treatment, this happens independently for each group member. Our hypothesis is that different environmental risks may differently affect the ex post payoff inequalities, so that other‐regarding preferences (inequality aversion) may generate higher contributions in HomR than in HetR. Our main result is that the environmental risk does not affect the patterns of cooperation either in the one‐shot or in the finitely repeated version of the game. This suggests that the standard experimental methodology provides a robust and conservative measure of human cooperation.     

International credit and welfare: A paradoxical theorem and its policy implications

This paper considers a developing nation that faces a foreign exchange shortage and hence its demand for foreign goods is limited both by its income and its foreign exchange balance. Availability of international credit relaxes the second constraint. We develop a simple model of strategic interaction between lending institutions and firms, and show that the availability of international credit at concessionary rates can leave the borrowing nation worse off than if it had to borrow money at higher market rates. This ‘paradox of benevolence’ is then used to motivate a discussion of policies pertaining to international lending and the Southern government's method of rationing out foreign exchange to the importers.     

Maintaining the Common Pool: Voluntary Water Conservation in Response to Varying Scarcity

Studies of voluntary conservation response to changing information about an environmental problem have traditionally been synonymous with studies of information campaign effectiveness. As such, they have not been able to capture the response to actual changes in the environment. This paper takes a novel approach to identifying voluntary conservation by studying the impact of changing storage levels on urban water usage in the context of a prolonged drought and a highly ’water aware’ community. Our results suggest that voluntary conservation increases substantially when water is scarce and the public value of the savings is greatest. We discuss the implications of these findings for our understanding of environmental information campaigns in general, and urban water demand management in particular.     

Geographical advantage: Home market effect in a multi-region world

I propose a theoretical framework for studying the effects of geographical factors on the distribution of industries across many regions. The geographical feature of each region is summarized by a proximity matrix, whose elements measure the closeness between every pair of regions and depend on the parameters representing the transport and other costs of using a variety of trade routes. A change in these costs of trade affects the distribution of industries by amplifying the geographical advantages and disadvantages of regions. Through a series of examples, I demonstrate how this framework can be used not only to examine the effects of an improvement in transport infrastructure, but also to address some problems from economic history, regional economic integration, and the north-south division, and discuss some geopolitical issues.