Concepts
The word “resources” has multiple meanings, being understood differently by various people. It means natural resources such as oil, coal, ores, and so on when used in daily conversation or in the media.
On the other hand, researchers use the word in a slightly different way, and the usage may differ among disciplines and even within a discipline itself. In order to avoid possible misunderstandings, we first explain how the word has been interpreted in economics so far, and how it is defined here.In modern mainstream economics, represented by a general equilibrium theory, resources refer to materials and services required for production; primary resources such as labour, land, and natural resources, as well as produced means of production such as capital goods. When one refers to, say, efficiency of resource allocation in a general equilibrium analysis, the word means the resource just mentioned.
In this usage, natural resources are merely a part of resources broadly defined in modern economics. In the following I speak of resources in a broad sense, on the one hand, and natural resources or resources in a narrow sense, on the other.
In whichever way the word is defined or interpreted, there is a common nature in resources defined or interpreted in either way: they are objects of market transaction, so that their cost of production or their scarcity is reflected in prices. The higher their cost of production or their scarcity, the higher is their price.
It was quite natural for the early economists to have focused their analysis mainly on resources which can be sold and bought in markets, since materials or services with positive value were their primary concern: materials without value or price were not regarded as an object of economic analysis. Consequently, in so far as resources are transacted with positive prices in markets, they could be analysed within a framework of traditional economics, with minor modification, if any, regardless of the difference of definition.
There are, however, materials or services whose scarcity is not reflected in prices, despite their essential contribution to human economic activities. The natural environment, such as air, rivers, lakes, oceans, ground (differentiated from land which can be transacted in markets), wilderness, the ecosystem, and so on, are bases for all creatures including human beings. Without these, human beings cannot sustain their lives and engage in economic activities.
Owing to the indispensable characters of these environmental elements for our lives and economic activities, they may be considered resources, even though their scarcity is not directly reflected in markets, on which they are traded and priced. Let us call them environmental resources. Actually, by so defining it, the natural environment has come to be analysed by extending conventional economics, and, furthermore, the results can be interpreted in the scope of resources economics.
In the following, when the word “resources” is referred to, it means both resources in a broad sense and environmental resources in most cases. Yet, occasionally, the word must have a specific meaning and, in that case, expressions such as “resources in a broad sense” or “environmental resources” are used.