Friday, November 30, 2007


When resources become scarce in market economies with relevant price systems, prices increase. This price increase which reflects the increase in scarcity leads to land, capital, labor, and natural resources being used in different proportions. The higher price motivates users to reduce consumption or increase the use of substitutes. It motivates producers to increase the supply of resources if possible, or to invest in technology that better utilizes resources or leads to substitutes. The result of higher prices, substitution, and technological change is that scarce resources are used more efficiently or less intensely. It is then possible for economic growth to continue in the face of diminishing or degrading of natural resources.

Drastic changes in regulations or tax policy that stifle this process could leave us without the technological means to deal with future scarcity. This is something to be considered when dealing with climate change policy.

1 comment:

Ashley :) said...

you are so great :)
ima 18 now but i wanna be just like you