Teaching Notes (Strictly not for sale)

GEOG 302: Polarized Debate

Dr Joseph Teye

HISTORY OF RESOURCE SCARCITY CONCERN

Widespread concern over the possibility of severe resource shortages in the world is
not a recent development. Malthus, in 1798, made pessimistic predictions on future
resource availability. He argued that since resources are limited, rapid population
increase would result in food shortages. According to Rees (1990), the immediate
precursor of most recent period of concern over resource shortages and environmental
problems was rapid depletion of metallic and energy mineral reserves during the
Second World War. In the United States and Europe there was a general concern over
the availability of those minerals for reconstruction and renewed industrial growth.
For instance, it was predicted in 1950 that World iron ore reserves would be depleted
in twenty years time.
However, the economic and technological response to the fear of resource scarcity
was swift. Massive investments were made in technologies to allow the extraction of
mineral deposits that were previously considered as economically unviable. Besides,
the level of exploration activity increased, with an upsurge of investment in
previously underexploited developing countries. These measures increased the
supplies of essential mineral resources. By the end of the 1950s, the immediate danger
of severe resource shortage was past. The 1960s, however, saw a renaissance of
academic and public interest in scarcity of natural resources. These fears were fuelled
by rapidly rising trend of natural resource use in the developed world. There was also
concern about the impact of waste products on the environment. A number of books
were published presenting doom-laden warnings about future resource scarcity and its
implications for economic development and the survival of mankind (see for instance,
Forrester, 1970). It was predicted that complete exhaustion of essential mineral stocks
would cause the total collapse of society during the early part of the twenty-first
century. The concern raised by these publications was fanned by the 1973 oil crisis,
which followed the Arab-Israeli war, and by the success of Organization of Petroleum
Exporting Countries (OPEC) in reducing oil supplies and achieving massive increase
in oil prices. Scarcity then became a political issue; the possibility that producer
nations could and would exercise political and economic power through withholding
essential minerals appeared as a major threat to the developed countries (Rees, 1990).
These scarcity concerns generated the polarized debate.

THE POLARIZED SCARCITY DEBATE

As hinted already, concern over the future supply of natural resources were not new.
There is no doubt that technological innovation has been able to prevent complete
physical exhaustion of essential stock resources. However, two important questions
still remain about future resource supplies. The first is: how long can technology
continue to act to prevent shortage of essential resources? The second question is: if a
physical exhaustion eventually sets in for particular natural material, can
technological, economic and social change act to reduce its resource significance?
Different judgements about the answers to these questions largely account for the
polarized debate over resource scarcity in the 1970s. I would like to discuss with you

the arguments of two main schools of thought on future resource scarcity. These are
the pessimist school and the market optimists (Rees, 1990).

The Pessimistic School

The pessimists believe that resource scarcity in the near future is inevitable, since
stock resources are limited and human population continues to rise. Thus, their main
concern was rapid population increase and the associated increase in consumption. In
their view, therefore, economic development in the near future would be brought to a
halt by shortage of essential resources. On the basis of these arguments, they have
developed deterministic models to measure resource life. The most pessimistic
measure of stock resource life occurs when current proven reserves are taken as limit
of resource availability. As I explained already, the use of this concept presupposes
that no discoveries will take place and no technological and economic changes will
occur to convert conditional reserves into economically recoverable resources. The
life of each mineral resource can then be estimated by dividing current reserves by
present annual consumption to give the so-called static life index. Forrester (1970)
and Meadows et al (1972), for instance, calculated life expectancies of some stock
resources. It was predicted, in the 1970s, that reserves of most stock resources will be
exhausted within fifty years (Goldsmith et al. 1972). Oil and gas would have finished
by now.
It is obvious that these pessimistic views have not been supported by historical
developments. For instance, predictions made in 1950 that world iron ore deposits
would be completely depleted by 1970 have proved to be widely inaccurate; in fact by
that date enough reserves had been established to last for further 240 years at the then
current level of consumption. Thus, for most minerals, the rate at which new
discoveries and technological changes have added to proven reserves has exceeded or
at least kept pace with increases in consumption (Rees, 1990). From the preceding
discussion, it can be stated that though it is axiomatic that there must be a limit for
each individual resource stock, no one can predict when this limit will be reached.
Again, we do not know whether the substance will still be considered as a resource
when its physical limit is reached.

The pessimists have been criticised for failing to recognise the fact that resources are
created by man. In theory, man has the capability to create substitutes to replace
scarce stock resources. By focusing so much on the limits of natural systems, the
pessimists have failed to recognise the ability of man to develop new technologies to
allow the extraction of sub-economic resources and or reuse some materials. In the
case of some metals, for instance, man has developed the technology to recycle them
and this means that those resources can be reused. Thus the static life index is
inappropriate because it wrongly assumes that there will be no discoveries and that
consumption will be static.

Although they have been lambasted for many simplistic assumptions, some of the
arguments of the pessimists are still relevant. It is important to recognise that
mismanagement of resources can bring some problems to the world economy.

The Market Optimists

In contrast to the argument of the resource pessimists, the market optimists believe
that the market system would respond automatically to prevent severe resource
scarcity problems. They forwarded the market response model and the role of
substitution thesis to support their claim.
The Market Response Model
Scarcity
Extraction Costs Rise
Prices Rise

Demand Decrease

Supply Increase

Increase use of substitutes,

Greater economy in use,
More recycling

Increased viability of
known deposits

INNOVATIONS

Development of new
substitutes,
Development of improved
conservation methods,
Improved recycling
techniques

Search for new deposits,

Development of methods to
increase the output from
known sources

Figure 1: Market response model

Source: Rees (1990:39)
The market response model posits that in a perfectly working market economy the
price of any natural commodity which was becoming scarce would inevitably rise.
The increased production costs associated with diminishing returns would imply that
producers can only supply adequate quantity of the commodity if price rises. Price
would, therefore, rise until supply and demand were again in equilibrium. Such price
rises would set in train a whole series of demand, technological and supply responses

(figure 1). First, demand decreases as users turn to cheaper substitutes, or introduce
economy and conservative measures. In the case of metals, increasing recycling also
leads to decrease in demand. Second, both the price rise and fears of severe resource
shortage provide an incentive for innovation. The resulting technological innovations
are likely to increase the availability and decrease the cost of substitutes. The
technological innovations would also lead to improve conservation methods and the
use of improved recycling techniques. These changes will then feedback through the
price mechanism to control demands and so reduce pressure on the originally scarce
commodity. Third, the price rise will make it economic to extract hitherto unviable
deposits (conditional reserves), encourage the search for more resource deposits and
promote development of new extraction technologies to increase effective yields from
known deposits. In a nutshell, this model assumes that physical resource scarcity will
be controlled by market forces.
The Role of Substitution
Apart from the market response argument, the optimists further explained that by
relying on substitutes, society will be able to reduce demand for a resource that is
becoming scarce. If this occurs, then scarcity will not affect living standards or
economic growth. Thus, they have assumed that no individual stock resource
commodity is absolutely essential; substitutes exist or will be found to replace it. Rees
(1990) has listed the following forms of substitution in this context. First, direct
substitution occurs when one resource commodity takes over the role of another.
The same mineral can sometimes be extracted from different sources. When the
traditionally used source material resource becomes scarce, attempts may be made to
develop technologies to allow extraction from alternative sources. For example, fears
that bauxite would become scarce in the near future have encouraged research into
techniques for extracting aluminium from non-bauxite ores, such as carbonaceous
shales and kaolin clays. Similarly, one mineral could be directly replaced by other
materials in some of its end-uses. For instance, stainless steel, aluminium and plastics
are all substitutes for copper. You may be aware that aluminium has already taken
over the high-voltage transmission line market. Plastic piping has also replaced
copper for many household plumbing purposes. Again, although copper was the
common metal used for manufacturing kitchen pans in the past, aluminium and
stainless steel are now widely used to produce such pans.
A second form of substitution occurs when the need for specific resource products
or services is reduced by substitution of technology and capital for the resource.
To use the copper example again, the need for undersea transmission cables, a
hitherto major copper end-use, has significantly declined with the development of
microwave technologies and communication satellites. Measures to improve the
efficiency with which a specific resource is used can also have significant effects on
consumption. For instance, the Ghana government has been advising households to
reduce their energy consumption by investing in energy-saving bulbs and appliances.
All these illustrate that demand reductions can be achieved without declining living
standards.
A third form of substitution involves the increased use of recycled materials at the
expense of the freshly mined product. For a number of metals, recycled old scrap

already serves significant proportion of the final market. For example, local welders
in Ghana make use of various forms of scrap metals rather than fresh ones.
Another form of substitution occurs when lifestyle or demand changes alter the mix
of final goods and services. Individuals and governments can make choices about
what stock resources to use and these lifestyle changes can be used to reduce the
consumption of a resource that is becoming scarce. For instance, as price of cement is
increasing tremendously, Ghanaians are being advised to use bricks instead of blocks.
If this advice is taken by estate developers, then the demand for the raw materials
used to make cement will fall.
From the above, it is clear that the substitution thesis posits that resource scarcity will
not set in because substitutes will be found to replace scarce resources. The challenge
here is that it may not be easy to get very good substitutes for some essential
resources, such as water and air. In the presentation that follows, I will take you
through some of the other challenges to optimism.

Challenges to Optimism
Market imperfections
The market optimists have based their postulations on a perfectly competitive market,
comprising of firms acting in a rational way to maximise profits. Such a market is also
characterised by free exit and entry so that no single producer has monopoly over
the supply of the goods and services. The system must also be free from intervention
by governments. It assumed that these conditions will produce the demand,
technological and supply responses needed to allocate resources optimally over time
and space. Given that such conditions do not exist in the real world, physical resource
scarcity problems may arise.
Critics have also argued that the market optimists have failed to consider how market
uncertainties could lead to overexploitation of resources, thereby creating shortages in
the short-run. The argument here is that since prices of some resource products have
been volatile, some producers may decide to reduce their uncertainty about future
incomes by increasing current output at known price levels. This may lead to overexploitation of natural resources, thereby leading to scarcity in the future. It is also
argued that some private producers may increase current output for fears that
substitutes could be developed later to reduce prices in future. These factors may lead
to the rapid exhaustion of known reserves. The same factors may prevent companies
from investing heavily in exploration and the development of new supply sources.
One way of dealing with these problems will be for the state to take over resource
exploitation. However, there is no evidence that matters would improve if resource
development is taken out of private hands and into public control. In democratic
states, for example, the need to seek re-election tends to enhance the perceived shortterm income and trade advantages of rapid exploitation. Countries under military
regime equally need a lot of funds to buy military equipments and also to maintain
their neo-patrimonial networks and thereby remain in power (Teye, 2008). All these
will force the governments to over- exploit resources (see, Grianger and Konteh,
2007). Besides, as export income is needed in developing countries, many poor

countries may exploit more resources today, and this will affect future supplies. For
instance, Ghana depends heavily on gold. The need for funds to promote development
means that the government will find it difficult to control exploitation.
Resource Security
Even if it is assumed that despite the imperfections, market forces will still act to
avoid worldwide physical scarcity problems, difficulties may still arise in some
countries because of the uneven spatial distribution of resources. The market system
will not necessarily ensure that consumer demands are met in each individual country
by the development of indigenous resources. Individual countries may also temporary
experience shortages because they are unable to import the required materials.
Developing countries may lack the financial resource to import enough resource
products. For instance, in the year 2008, many poor countries including Ghana were
seriously affected by the rapid rise in prices of petroleum products. In Ghana, the
government had to respond by cutting budgetary allocation to ministries. Here, there
were adequate oil reserves in some countries, but poor countries could not import
them. Developed countries could also face resource security problems. They may be
affected by political upheavals in their supply areas or by trade embargoes. Thus,
there are possibilities of at least temporary shortages in some countries, arising from
trade restrictions or war.
Economic exhaustion
The argument here is that as resource deposits become scarce they are more
physically difficult to mine. This causes supply costs to rise. The producer may then
need to receive progressively higher prices for each unit of output in order to cover
the production costs. But as price increases so fewer and fewer consumers will be able
or willing to purchase the mineral. In this case, no production can take place at prices
that consumers are willing to pay for the commodity. This is termed economic
exhaustion, and it occurs much more rapidly than even physical exhaustion.
Economic exhaustion will bring about scarcity of the resource on the market.
Thus, the market forces are rather likely to accelerate the onset of exhaustion since
deposits are almost inevitably economically exhausted long before they are physically
worked out. For instance, the coalmines closed in Britain since the 1960s still contain
coal but given current market conditions, it can only be sold at prices below
production costs.

Environmental Change
The market optimists have also not considered environmental problems that will rise
if even market processes were indeed able to prevent physical exhaustion of stock
resources and were allowed to do so unchecked by government activity. As you may
be aware, resource extraction involves disruption to vegetation, soils and drainage
patterns as well as water pollution. For instance, the exploitation of gold partly
account for deforestation, soil degradation and water pollution in mining communities
in Ghana (Teye, 2005). These environmental problems are already pervasive in many
developing countries, and it is believed that the problem will get worse if market
forces are allowed to allocate resources. For most minerals, the degree of

environmental damage increases as lower-grade deposits are worked and the scale of
operations increase.
There are two implications of environmental concerns here. First, environmental rules
may be employed to check exploitation. Second, the government may ignore the
environmental impacts of resource extraction. Both steps can create resource
shortages. Strict enforcement of environmental laws could affect the extraction and
supply of some mineral resources. This may cause scarcity problems. This scenario
sometimes occurs in some developed countries where environmental groups may raise
concerns to stop production. For instance, opposition to oil developments in the
United States did hold up the construction of the Trans-Alaskan pipeline and curbed
production in the continental shelf area of the South-Eastern USA (Manners, 1981).
Similarly, pollution control regulations have imposed additional costs on resource
producers in some countries such as US and Japan. On the other hand the government
may ignore environmental concerns of stock resource extraction. This means that
more pressures will be placed on the absorptive capacity of the environment and
therefore on the availability of environmental quality resources.

Flow Resource Scarcity

Whilst one can argue that in the foreseeable future, economic development will not be
brought to a catastrophic halt as a result of stock resource scarcity, it is not possible to
be so sanguine about the continued availability of environmental resources. This is
because the economic system does not contain mechanisms which can reduce
depletion or degradation of flow or renewable resources such as water and forests.
Thus, flow resource scarcity and degradation may be more pressing problems than
stock resource exhaustion. Indeed, market forces and technological advancement have
not acted to reduce pressure on renewable resources as they have in the stock resource
case (Dasgupta 1982). Rapid population growth, high industrial output and mankinds
quest for higher standards of living have all combined to increase the rate of
environmental change. Indeed, man has negatively modified several aspects of the
natural environment. For instance, the use of fossil fuels is a major cause of air
pollution which threatens the very existence of man. In addition, changes in
agriculture designed to increase output such as the use of pesticides and fertilizers
have all affected landscape quality, and reduced diversity of flora and fauna. Water
bodies have also been heavily polluted by human activities.
It is important to mention that many of the problems of flow resource depletion and
degradation are exacerbated because these resources are often common property or
common pool resources. This implies that the resources cannot be owned
exclusively by any one person or a private company. For instance, no one can say that
he/she exclusively owns the river Volta. In other words, resources such as fish, water
and air extend indivisibly over very large areas; as a result, no single user can control
the supply, regulate the number of other users or the quantity they use. Therefore, it is
common for overuse to occur in the short run, with the danger of long-run depletion
(Rees, 1990). Hardins thesis, The Tragedy of the Commons, was one of the earliest
writings that captured this problem of managing common pool resources. He likens
common property resources to a finite pasture that is opened to all herdsmen in an
area. He then argued that each rational herdsman will want to increase the number of

his animals to get more income. This will consequently lead to the degradation of the
common pasture (Hardin, 1968). The implication of Hardins thesis is that when a
group of people are in a situation where they could mutually benefit, if all adopted a
rule of restrained use of a common resource (such as water, forest etc), they are not
likely to do so (unless they are coerced by an external force) because each person
fears that even if he/she adopts conservative methods, others will use the resource
indiscriminately. This behaviour of the users could lead to the depletion of the
common pool resource (hence the tragedy of the commons).