On Measures of Natural Resource Scarcity

Fisher, A.C. (1977). On Measures of Natural Resource Scarcity. IIASA Research Report. IIASA, Laxenburg, Austria: RR-77-019

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Abstract

Several questions concerning measures of natural resource scarcity are considered with the aid of optimal control models of exploration and extraction. It is shown that the unit cost of extraction is not a sufficient indicator of resource scarcity, because it neglects demand generally and the value of future output foregone in particular. Under plausible conditions, though, cost will rise as stock is depleted. Resource rent is also not fully satisfactory as an indicator of scarcity, since, contrary to recent suggestions, it may fall if cost rises as the stock is depleted. The best measure of scarcity is probably the market price of the resource. Introducing exploration into a model of optimal extraction leads to a practical proposal for estimating rent from exploration cost data.

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