TCS Daily

Planet Earth 3000

By Pete Geddes - May 15, 2003 12:00 AM

Every society faces the important challenge of meeting its desires without compromising the ability of future generations to meet theirs. Since we care about the well being of future generations, the question is, how do we best allocate scarce resources over the long term?

Here I consider four categories of resources. The first is renewables, such as trees. These are conceptually easy to deal with and generally pose few problems. Private firms like Weyerhaeuser and Temple Inland easily coordinate production to meet demand.

The second is common-pool resources. These resources have no owner, and limiting access to them is not practical. Ocean fisheries and the atmosphere are examples. This creates the famous "tragedy of the commons." Nineteenth century whaling, which drove several species to the brink of extinction, is a classic case.

Some common-pool resource problems can be addressed by assigning property rights, for example tradable quotas for ocean fisheries. Much of the pioneering work on this approach was done by the Center for Political Economy and Natural Resources at Montana State University in the 1970s. But other common-pool resources, like the atmosphere, require a regulatory approach. For example, the Montreal Protocol successfully banned the production of ozone-depleting chemicals.

The third resource category is nonrenewable commodities, e.g., copper and coal. Here the key question is determining the optimal rate of depletion, i.e., the rate at which we draw down irreplaceable stocks. The market functions well here. Rising prices signal increasing scarcity and provide incentives for conservation and the search for substitutes (e.g., silicon fiber-optic lines replace copper phone wires).

A policy of saving natural resources for future generations is problematic. For example, how can we reasonably know what resources future generations will value? At different points in time all of the following have been high on the list of resources to conserve: 250 years ago, the tall, straight timbers of eastern white pine that the British navy sought for ship masts; 150 years ago, whale oil for lighting; 75 years ago, helium for Army and Navy blimps. Petroleum would not even have been listed until it became an economic resource in 1859 at the Drake well in Pennsylvania.

By consuming nonrenewables, we implicitly make a deal with our grandchildren. We draw down the stock of some resources and transform them into products that on balance improve our lives - and the lives of our grandchildren. How does this work?

We save and invest a portion of the proceeds from our resource use. This provides future generations a large stock of capital to address all sorts of problems that we cannot imagine.

Economist Thomas Schelling has powerfully applied this notion to the issue of climate change. Since any truly serious consequences of climate change will not appear for many decades, Schelling asks: why worry so much about the welfare of future, more wealthy generations while depriving today's most destitute?

Because the world will be much wealthier and more technologically adept in several decades, the best climate change policy is to emphasize present economic growth, especially in the developing world. Wealth dramatically increases resiliency to all sorts of stress, including climate change.

The final category is amenity resources. Endangered species and wilderness areas are examples. This category presents many challenges, but also offers great potential for policy innovations. Because this category includes resources that have no price and no owner, the market alone is insufficient for protection. There are no substitutes for grizzly bears, polar bears, or panda bears.

Governmental ownership also has serious limitations. As Vice President Al Gore wrote in Earth in the Balance, "the most serious examples of environmental degradation in the world today are tragedies that were created or actively encouraged by governments."

It's in this category that a niche has opened for a new breed of environmental activist - environmental entrepreneurs. The Nature Conservancy is an example. Creativity, flexibility, and adaptability are their hallmarks. These qualities are essential in coordinating habitat protection and building constituencies for wildlands.

Our consumption of resources is not a zero-sum game. By maximizing knowledge, technology, and wealth today, we increase the probability that future generations will be able to meet their material needs better than any preceding generation.

Pete Geddes is program director of the Foundation for Research on Economics and the Environment (FREE) and Gallatin Writers. Both are based in Bozeman, Montana.

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