Economic theory emerged from problems related to allocation of scarce resources. Natural resources are limited and increased demand of such resources makes them relatively scarcer. In resource economics we study the allocation of natural resources under different conditions, including optimal allocation while maximizing given objective functions.
- Economics is the study of the allocation of limited resources to satisfy human wants or desires.
- Scarcity of resources implies that their use is costly
- Using a resource incurs an opportunity cost, in the form of an alternative foregone benefit.
Natural resources may have direct economic consumption values or they may have value as input factors in production of other consumables.
Natural resources are often classified into two groups: Renewable and Non-renewable resources. These two terms refer to the human use of natural resources, where stock resources as oil and minerals are considered being non-renewable even though they in principle (and in a geological time perspective) really are renewed.
Natural flow resources are divided into two groups: Exhaustible and Non-exhaustible resources. Non-exhaustible renewable natural resources are resources where future availability is not dependent of earlier consumption. The most pronounced resource of this kind is the energy we receive from the sun.
Exhaustible renewable stock resources may also be separated into two groups: Biological stock resources (biotic resources) and physical stock resources (abiotic resources). To the latter we count soil components, the earth's ozone layer, etc.
Biological stock resources are finally grouped into two: Resources which are object for hunting and fishing and biological stocks which are farmed or breeded for food production. The two groups differ only by the latter leaving more control to resource exploiter, e.g.population density, rotating one generation cultures, etc.
The concept of Resource rent was developed and become an important economic term already in classical economics during the 19th century and played an essential role in works by David Ricardo (1772-1823) and Karl Marx (1818-1883).
Initially the term Resource rent was closely related to the use of land. Land was a renewable, but scarce resource. Differences in production capacity of different land areas influence the amount of potential resource rent. In modern economics the term differential rent or intra-marginal rent, is used on differences related to other production factors, while resource rent is reserved the properties of natural resources. By this one differs between the production capacity of the natural resources and our ability to exploit these resources in the most cost efficient way.
Both differential rent and resource rent represent abnormal or super normal profits, similarly to monopoly rent. A common expression of these three types of rent is Economic rent. Economic rent is obtained when the profit earned exceeds the opportunity costs of all input factors.
Some definitions of Resource Rent found on the internet:
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