Natural resource economics looks at the supply, demand, and allocation of natural resources and the implications that the exploitation and conservation of natural resources has on public policy. Natural resources are separated into two categories – renewable and non-renewable, the resources that can be reproduced and grow and those that cannot. Non-renewable resources include resources like fossil fuels (coal, petroleum, and natural gas) and metal, and renewable resources include resources like solar power and fish¹. The use of a non-renewable resource involves an intertemporal tradeoff, which is the value of the payoffs for a decision or trade¹. The interaction between natural systems and economic systems as well as the payoff for using non-renewable and renewable resources will be discussed. Pollution and depletion of natural resources are issues that are looked at as well.
Natural resource economics falls under microeconomics because it deals with resource allocation, government intervention, markets and private property. It examines environmental policies regarding water, energy, pollution which are assessed for private use, therefore making it fall under the micro scale of economics.
In natural resource economics, pollution and the environment are evaluated through an economic perspective, and resources are allocated using econometric methods. It measures the benefits and costs of using different resources. Methods of damage assessment, benefits of environmental improvement, and policy choice are topics that fall under natural resource economics.
1. Horan, R.D., van Soest, D. Resource and Energy Economics. Retrieved from www.journals.elsevier.com/resource-and-energy-economics