What Are the Different Aspects of Resource Economics?

Resource economics, like all other economic topics, is the study of trade-offs and choices in the use of limited or scarce commodities. The emphasis of resource economics is the development, allocation and use of resources, which often refers to natural resources. In the more developed countries, resource economics might cover preservation and restoration, and in less-developed nations, the emphasis typically is on allocation. The most common resources analyzed are energy and other non-renewable resources, agriculture, land use and water.

In the public sector, resource economics provides a framework for analysis of public policy alternatives to preserve and protect wildlife, open spaces, farmland or natural resources such as timber or fish. Policy tools include analyzing the effect of licensing, taxes or quotas to encourage consumers of the resources to allocate them in a way that is both efficient and sustainable. Regional and local governments use the analysis to determine the best policy mix for their specific needs and objectives.

Within the private sector, resource economists help companies make the best use of resources to minimize costs and maximize profits. These issues apply equally to agricultural and non-agricultural companies. Many companies, especially in developed countries, want to appeal to "green" consumers who are concerned about sustainable uses of dwindling natural resources and often choose products from companies that implement these methods. A company's public image and profitability might be damaged by negative environmental effects such as oil spills or toxic runoff from mining or agriculture, potentially resulting in lost business and lawsuits.

Energy is one of the most important resources. Both public and private sector resource economists study ways to reduce environmental effects such as pollution and climate change while ensuring sufficient energy resources for everyone. They might investigate new sources of energy as well as ways to reduce energy consumption of fossil fuels and conduct cost-benefit analyses to determine the most economical methods of production.

The field of agriculture and food production is another major area for resource economics. As the global population grows and agricultural land shrinks, it is necessary to protect existing agricultural resources and maximize output while considering the environmental effects of agriculture. Public policy can encourage farmers and agricultural companies to achieve both outcomes, and private sector resource economists work with scientists to develop new products and techniques for farming and food production. Change in pesticide use is an example in which adverse environmental effects forced the private sector to develop new products and methods.