Article Review
Article Details:
Source: Journal of Environment al Economics and Management
Objective of Study
Concerns have been expressed across the world among environmental scientists, economists and policy makers over the depletion of the non-renewable resources and its consequences. It is believed that scarcity of resources will ultimately hamper growth. Theoretical models have proved that over time the price of exhaustible resources will rise as resource adequacy will decline as more resources are extracted. But empirical findings could not substantially support the theoretical results. Studies on the resource prices suggest that the prices of resources have actually fallen with time. The article under review brings in these two conflicting propositions and finds out the reason behind this difference in the results. The author has developed a model and conducted an empirical study which shows that the price of non-renewable resources like metals move in an U shaped path. This ‘U’ turn of price actually occurs due to the changes in technology used for extraction and also change in the grades of ores that is available while mining over some time .
Data Sources
Results
The empirical outcome shows that some meals have a falling price path and for some the price had been stable while some metals have shown a rising trend in prices. Aluminum shows a falling trend though it has a high rate of consumption due to its relative abundance and technical improvement. Lead and Zinc has shown little change in price due to low consumption while Tin prices have risen over the years because of the fact that little technical changes have occurred in Tin extraction.
Evaluation
The article has been cited by quite a number of studies. Since metals are inputs for a the production of a large number of goods the long term changes in the price of metals is an important issue for a number of industries. For example production of solar photovoltaic (SPV) cells requires a number of minerals. Thus the availability and the price of the material input is quite important in determining the price of SPVs. A study on the deployment of SPV s have cited the present article as the prices of metals do determine whether it will be feasible enough to use SPVs on a large scale.
The article has made important predictions about future movements of prices. We find a number of studies conducted at a later period that shows that resource adequacy actually can hamper growth for resource abundant countries and in fact can be counter-productive as it adversely affects the terms of trade . It is true that contrary to popular belief prices of non-renewable resources have not risen. Technological improvement has resulted in falling price in many cases. We have recently observed this phenomenon in case of the price of crude oil. The fall in the extraction costs has actually led to the rise in supply of crude. Thus we find the relevance of the study that has been conducted by the author. The study can provides inspiration and direction for further empirical research on other resources in other countries as well.
Works Cited
Isham, Jonathan, et al. "The Varieties of Resource Experience: Naturla Resource Export Structures and Political Economy of Economic Growth." The World Bank Economic Review (2005): 141-174. English.
Ploeg, Frederick van der. Natural Resources: Curse or a Blessing? Working Paper No. 3125. Munich: CESifo, 2010. English.
Slade, Margaret E. "trends in natural-Resource Commodity Prices: An Analysis of the Time Domain." Journal of Environmental Economics and Management (1982): 122-137. English.
Wadia, Cyrus, A. Paul Alivisatos and Daniel M. Kammen. "Materials Availability Expands the Opportunity for Large-Scale Photovoltaic Deployment." Environmental Science and Technology (1982): 2072-2077. English.
