Lecture Notes Ch 15 Cost of oil is increasing Growing demand for natural resources Word population is 6 6 billion Asia China India Standard of living Thomas Malthus thought we would run out of food Higher living standards have produced lower birth rates Replacement rate everyone would have to reproduced 2 1 to replace existing population Demographers say the population will peak at 9 billion Death rates fall with modernization Population explodes And eventually the fertility rate will fall below the replacement rate We treat children as liabilities now not economic assets large families with multiple children Energy resources are less per capita The world is not running out of energy there are other alternative resources it just may cost more in the short run but not the long run Viable alternatives o Biodiesel 80 o US corn based ethanol 60 o Shale oil 40 o Tar sands Brazilian ethanol o Conventional oil 20 Renewable VS Nonrenewable o Oil coal metals o User cost you used is so you can sell it o Higher expected demand encourages less extraction today o Forests and wildlife o Well structured property rights encourage sustainable uses o 30 of the world s land is forest o Differences in property rights between developed countries vs undeveloped Elephants o Optimal fisheries market Identified by location and species Difficult to establish property rights Overfishing encouraged Policies limit catch size Total allowable catch Individual transferable quota Pollution o US has restrictions of pollution o Emerging nations like China don t have policies yet Growth isn t bad for the environment Richer countries tend to spend more to protect the environment Notes out of the textbook Ch 15 Larger populations mean greater demand for resources Thomas Malthus believed that higher living standards would produce higher birthrates o Not true for society Replacement rate necessary to keep population from falling overtime Total fertility rate average number of children that a woman is expected to have in her lifetime o 2 1 births per woman is necessary to keep the population constant o Populations are expected to fall over the next few decades Demographers scientists who study human populations o World population will peak at 9 billion The world population is still increasing because countries like India are still modernizing o Currently the world population is about 6 6 billion today o Too few young workers will be supporting too many elderly Social security Lack of soldiers o Children have transformed from economic assets to economic liabilities o Government efforts to raise birthrates by offering financial incentives to parents Commodity supplies have increased faster than commodity demands Living standards can be raised without having to increase energy inputs Running out of oil wouldn t mean running out of energy it would mean running out of cheap energy Net benefits the total dollar value of all benefits minus the total dollar value of all costs Renewable resources forests and wildlife o Perpetual benefits Nonrenewable resources oil coal metals User cost Extraction costs or production costs Present value help to ensure that a resource will be used at whatever point in time it will be most valuable o Upward slopping because the more the company extracts the more the company will have to pay for equipment and workers Conflict diamonds diamonds that are mined by combatants in war zones in Africa in order to provide hard currency needed to finance their military activities Elephant preservation Forest Management Optimal Forest harvesting Optimal fisheries Market o Fishery collapse a fishery s population is sent into rapid decline because fish are being harvested faster than they can reproduce o TAC Total allowable catch a policy that does work to reduce the catch size o ITQ s Individual transferable quotas individual catch size limits that specify the holder has a right to harvest a given quantity of a particular species during a given time period Tradable fishing quotas
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