Depletion of the environmental basis for renewable resources: The economics of interdependent renewable and nonrenewable resources

Abstract

This paper synthesizes familiar theories of nonrenewable and renewable resource economics in a two-sector, partial-equilibrium analysis of efficient trade-offs between renewable resource production and environmental development. The irreversible impacts of coastal zone development provide a motivating example. While development proceeds, the efficient harvest of renewable resources may exceed the “sustainable” rate. While development may involve several periods of growth and decline, once development begins it proceeds without significant interruptions. If a profitable renewable sector survives, development ceases before exhausting all profitable opportunities. Interdependent stocks reduce distinctions between resource types because each sector exhibits features of the other.