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Resources Policy 33 (2008) 4–11 www.elsevier.com/locate/resourpol

Mineral economics: Overview of a discipline$ Richard L. Gordona, John E. Tiltonb,c, a

Professor Emeritus of Mineral Economics, The Pennsylvania State University, USA Profesor de la Ca´tedra de Economı´a de Minerales, Mining Centre, School of Engineering, Pontificia Universidad Cato´lica de Chile, Chile c Research Professor, Division of Economics and Business, Colorado School of Mines, USA

b

Received 8 November 2007; received in revised form 12 January 2008; accepted 15 January 2008

Abstract Mineral economics is the academic discipline that investigates and promotes understanding of economic and policy issues associated with the production and use of mineral commodities. While its origins can be traced back at least 200 years to the writings of David Ricardo and other early Classical economists, it emerged as a separate academic field only after World War II and then primarily in the United States. As a separate academic discipline, its roots are found in mining schools that needed to consider the milieu in which minerals are sold. While geologists, mining engineers, and others with technical backgrounds were largely responsible for creating the first stand-alone mineral-economics programs, ultimately trained economists became participants as well. Moreover, even after the rise of mineral-economics departments, most of the research in the field continued and continues to be carried out in other academic units, including traditional economic departments and engineering schools, as well as in government agencies, nonprofit research organizations, consulting firms, and international organizations. In the decades following World War II, after early fears of a new depression and excess capacity evaporated, mineral economics focused on the long-run availability of nonrenewable commodities and the threat of supply interruptions for strategic and critical minerals from the Middle East, the Soviet Union, and southern Africa, concerns that persisted at least through the 1980s. The relationship between mineral companies and governments (with particular attention on taxes and other ways of sharing the benefits from mining) was another important issue, as were more traditional interests, including market analysis (mainly, price and demand forecasts), project evaluation, and monopoly and antitrust issues. Since then, the discipline has spread from its early North American base around the globe. The range of topics addressed has grown as well and now includes the environmental impact of mineral production and use, the resource curse, the rise of China and India as major consumers, the concerns of indigenous people and local communities, and a host of other economic and policy issues associated with mineral commodities. This article examines the nature of mineral economics, its emergence as a distinct academic discipline following World War II, and its more recent evolution. It concludes with a few observations about the future. r 2008 Elsevier Ltd. All rights reserved. JEL classification: L71; L72; Q3; Q4

Nature

$ An earlier version of this paper was presented at the Mineral Economics and Management Society 2007 Santiago Symposium on ‘‘Economic and Management Issues in the Mining Industry’’. Corresponding author at: Division of Economics and Business, Colorado School of Mines, Golden, CO 80401, USA. Tel.: +1 303 273 3482; fax: +1 303 273 3416. E-mail addresses: [email protected] (R.L. Gordon), [email protected], [email protected] (J.E. Tilton).

0301-4207/$ - see front matter r 2008 Elsevier Ltd. All rights reserved. doi:10.1016/j.resourpol.2008.01.003

Mineral economics is the academic discipline that conducts research and education on economic and policy issues associated with the discovery, extraction, processing, use, recycling, and disposal of mineral commodities. As Robinson (1989) shows, its roots can be traced back to the early development of economics as a formal discipline. Chapter III of Ricardo’s Principles is ‘‘On the Rent of Mines.’’ Malthus’s fears about resources are a still-recalled preliminary to the resource pessimism of subsequent years.

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Specialists also note Jevons’s 1865 book on the dire consequences of depletion of British coal (see Bradley, 2007). Despite such early work, the focus here is on the period since 1945. Separate mineral-economics programs in academia arose only after World War II, and prior to this time, mineral economics was not considered a separate field. Mineral economics borrows freely from many, more traditional disciplines, including economics, finance, management, statistics, econometrics, geology, mining and petroleum engineering, mineral processing, fuel science and technology, and metallurgy. The earliest participants in university programs had formal training in engineering or the earth sciences. The next step was enlisting as faculty graduates of mineral-economics programs, individuals who often had prior training in the earth sciences or engineering as well. Next came the hiring of people (like the authors) trained in standard economics who had studied mineral problems. With this evolution, the integration of skills took more varied forms. Good applied economics requires extensive knowledge of the peculiarities of whatever is being studied. As a result, mineral economists must have a solid understanding of the important technical and institutional relationships governing—and often constraining—the behavior of mineral markets and an ability to tailor their analyses to take such considerations explicitly into account. Mineral economists trained as economists tend to master selectively the underlying earth science and engineering and to concentrate on broader issues of market conditions and public policy impacts. Those with formal training in other disciplines often utilize their fuller knowledge to deal with more technical issues, such as investment appraisal. Many are initially trained in geology or other related technical fields, and then attend a graduate program in mineral economics or an MBA program to acquire the necessary tools in economics and business. In any case, the conceptual tools and principles used by mineral economists are the same as those used by other economists. Mastery of these tools is the trickiest aspect of the formal and informal practice of all kinds of economics. Those of us who have taught aspiring mineral economists and interacted with noneconomists attempting to deal with economic issues find wide differences in the ability to learn to ‘‘think like an economist.’’ A separate discipline? The issue of whether mineral economics is best considered a separate discipline or simply an applied field of economics has never been totally resolved. Those arguing for the former highlight the inter-disciplinary nature of the field. They note that much of the research and teaching has always drawn heavily on fields other than economics, such as finance. They also highlight the unique and critical importance of geological endowments and exploration for the mineral industries (see Mackenzie, 1987; Maxwell, 2006).

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Given the nonrenewable nature of the geological endowment, mineral economics has focused in some depth on the optimal use over time of mineral commodities and the prospects for mineral depletion and exhaustion. Ironically, these efforts suggest that the differences between nonrenewable and renewable resources can easily be exaggerated. The world will never physically run out of nonrenewable resources. This is in part because some—the metals, for example—are not destroyed in the process of extraction and use and after use are still available at some cost for recycling. More importantly, long before the last barrel of oil or last pound of copper is extracted from the earth’s crust, demand would fall to zero. In the standard models of exhaustible resources, this is caused by a sharp rise in production costs as high quality, low-cost deposits are exhausted. However, demand can cease for other reasons as well (see Gordon, 1967; Koopmans, 1974). For example, given the existence of effectively inexhaustible resources, such as solar energy and nuclear fusion, the fossil-fuel industries may simply fade away, like the whale oil industry more than a century ago, as new technology allows demand to shift toward cheaper substitutes. For this reason, long-run trends in real prices, real production costs, or other measures of what society has to give up to obtain another unit of a mineral commodity provide a better indicator of trends in availability than physical measures indicating how much is left in the ground. Indeed, the available estimates of physical supply cannot be understood without recognizing the economics. Given the costs, it is worthwhile to develop reserves only up to some multiple of current use—a 30-year supply at current production rates, for example. Estimates of potential reserves or resources are always highly speculative. As long as the pressures of exhaustion are modest, improved data on undeveloped resources are at some point not worth the costs. This is well illustrated by early U.S. efforts to delineate more fully its uranium resources, which in the 1970s were made irrelevant by large discoveries in Canada and Australia. Over the long run, we know that trends in real mineralcommodity prices can be upward or downward depending largely on whether new technology with the assistance of mineral substitution offsets the cost-increasing effects of depletion. Renewable resources are similar in the sense that their real prices and hence availability can increase or decrease over time. Moreover, if renewable resources are exploited beyond their regeneration rate, they can actually become exhausted in a physical sense, as the extinction of species illustrates. For more on this issue, see Tilton (2003). To be sure, mineral commodities do entail a stage of production not found in other industries: before mining and mineral processing can take place, known and economic mineral deposits must be identified by exploration or created by new technology. The exploitation of economic deposits is confined to specific geographic locations, dictated by the legacy of geological events occurring hundreds of million of years in the past. Mining

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can also generate huge economic rents, drastically alter the environment, substantially impact regional economic development, and where concentrated in just a few countries create security of supply problems for users. Just how unique these characteristics are and to what extent they justify considering mineral economics as a separate discipline, however, are open issues. Some question whether anything other than the relevant technologies distinguishes the mineral industries from other industries. Is discovery different from any other form of product development? Are mines more local or important to their communities than farms, textile mills, or automobile assembly plants? Is not any industry with a dominant foreign supplier a potential security risk? Yet whatever the rationale for separate mineral-economics programs, the effort worked. Strong faculties were built, excellent students were attracted (many of whom probably would not have pursued other academic programs), and a surprising number of these students went on to outstanding careers. Differences among mineral commodities The vast array of very different commodities covered by the field of mineral economics is commonly separated into three groups—metals, nonmetals, and energy minerals. In North America, which is a major producer of energy fuels, the discipline has traditionally been defined to include all three groups. In particular, energy economics was and continues to be an integral part of separate mineraleconomics programs. In the rest of the world, however, differences in mineral-production patterns have produced alternative approaches. In countries such as Chile where metals dominate, mineral economics includes only the metals and the nonmetallics. Conversely, those countries whose only significant mineral is oil create programs in petroleum economics. Regardless of how mineral economics is defined, it is important to highlight the wide diversity of mineral commodities. Perhaps most significantly, they differ in economic importance. At one extreme is the oil industry, which is so large that it contains several of the world’s biggest corporations. At the other end of the spectrum are metals used in minute quantities. Understandably, the more important receive most of the attention. Mineral commodities differ in a host of other ways as well. Some are extracted from open-pit mines, others from underground mines, still others from wells, and a few even from the ocean and the seabed. The technology involved can be simple but often is highly sophisticated. Some are produced in only a few countries and then traded around the world. Others are more ubiquitous and produced in many countries. The important mineral commodities are typically sold in international markets, so mineral economics took globalization for granted long before the concept became prominent. The economics of investment and transporta-

tion have similarly been a part of mineral economics from the beginning, largely because new projects generally require substantial investments and often mineral commodities are expensive to transport. Joint production of different commodities is also fairly common. Distinctions are often made among main products that produce most of a mine’s income, coproducts that generate similar shares of the returns, and byproducts that make minor contributions. Changes, of course, can occur over time. In North America, natural gas has moved from waste product to byproduct to co-product for many wells. A similar shift is apparent in Russia. Many mineral commodities are recovered from recycling scrap. Some are sold on competitive exchanges with volatile prices; others are produced by only a handful of firms and sold at stable producer prices. Since World War II, the mineral sector has experienced an increasing dependence on organized exchanges, along with a growing recognition by industry that formal markets and the use of price to equate supply and demand have their advantages. Given these great differences among mineral commodities, the scope of mineral economics is by necessity broad and diverse. No one single model or analytical approach is appropriate for all situations. Good analysts must understand the production technology and other important characteristics of the particular commodities they are examining and custom tailor their models accordingly. It is also worth noting that mineral economists work for a wide variety of employers with interests in the mineral sector—government agencies, mineral-producing and processing companies, banks and other financial institutions, law firms, consulting companies, international organizations, universities, and mineral-consuming companies. This list clearly shows that the economic and policy issues addressed are of interest to both the public and private sectors. The earlier years: World War II to the 1980s The pioneers of the first academic programs in mineral economics, as noted earlier, were scientists or engineers in colleges of mining and earth sciences. Those involved consider a 1931 collaboration between the Brookings Institution and the U.S. Bureau of Mines, along with the book (Tyron and Eckles, 1932) resulting from the effort, critical to the emergence of a distinct field. According to one pioneer, J.J. Schanz, Jr., creating the field was a natural extension of the mine-valuation courses that were standard in mining-engineering curriculums. Academic programs offering mineral economics The Pennsylvania State University was the first to offer academic degrees in mineral economics. In 1946, its School of Mineral Industries (now the College of Earth and Mineral Sciences) created a Department of Mineral Economics and began awarding B.S., M.S., and Ph.D.

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degrees in the field. Later the Colorado School of Mines, the University of West Virginia, the University of Arizona, and Michigan Technological University also introduced degree-granting programs at the graduate level. In addition, some mineral schools, such as Stanford, Columbia, McGill, and Queens, maintained mineral-economics programs with a single faculty member designing a student’s curriculum from courses offered elsewhere in the university. Alternative academic programs The research and teaching of other academic programs have complemented the efforts of the stand-alone mineraleconomics programs. Indeed, traditional programs in economics, responsible for much of the earlier research in the field, have continued to contribute important theoretic and applied work. Business schools have also been involved, as well as various specialized programs. Specialized programs are organized in several ways. The broadest field is natural resource and environment economics. Some practitioners of this approach consider one of the terms tacitly to encompass the other. Environmental economics can include all of resource economics, or resource economics can include the environment. Whatever the terms used, this approach had led to separate schools or colleges devoted to natural resources as well as to including broader resource issues into the traditional field of agricultural economics. The crude-oil price spikes of the 1970s produced a sudden rush by academic, governmental, and corporate economists to master energy issues. Although mineral economics at the time included energy, a strong conviction prevailed among the newcomers that they needed a separate identity. Possibly the inclusion of other, less glamorous minerals and the close association with longestablished entities were considered detrimental. Mineral economics at the time had strong associations with what once were schools of mines, mineral engineering societies, and the Department of the Interior. In any case, this led to the formation of the International Association of Energy Economists (IAEE—now the International Association for Energy Economics), several journals including that of IAEE, and new academic programs in energy. Parallel developments: the Paley Commission and RFF Concerns over the long-run availability of mineral commodities led President Harry Truman to create the President’s Material Policy Commission, more commonly known as the Paley Commission after its chair William Paley. Its five-volume report, which appeared in 1952, played a formative role in the early development of mineral economics. It highlighted the critical role of economics and promoted the perception that a market economy responding to economic stimuli can cope effectively with many policy issues.

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At Paley’s urging, the Commission encouraged the Ford Foundation to fund the creation of Resources for the Future, a nonprofit organization based in Washington, DC, dedicated to research and education in the development, conservation, and use of natural resources. Over the next several decades, RFF sponsored a number of important studies in this area, including the seminal book Scarcity and Growth by Barnett and Morse (1963). This work along with the extension by contemporary economists of exhaustible-resource theory largely shaped the debate over resource depletion for the first generation of mineral economists and even for many of us who followed. In brief, Barnett and Morse, somewhat to their own surprise, found that mineral commodities despite their nonrenewable nature had over the past century actually become less rather than more scarce. At least this was true with respect to what really mattered: namely, what society had to give up to produce another unit of output. The reason they argued was that the cost-reducing effects of technological progress had more than offset the cost-increasing effects of depletion. In the ensuing debate, their conclusions for the most part persevered, and most mineral economists (if not the public at large) today believe that the real prices of mineral commodities have generally been falling over the long run (Krautkraemer, 1998; Tilton, 2003). In the first decades of its operations, RFF was a prime sponsor of mineral-economics research—Adelman on oil, Lovejoy and Homan and then McDonald on state oil regulation, McDonald on oil and gas leasing, and Gordon on coal. Important work was also undertaken by RFF staff, initially by Schurr, Landsberg, and Herfindahl. They were followed by Russell, Bohi, Darmstader, Toman, and Parry.1 After the Ford Foundation ended its financial support, RFF had to rely more heavily on funding from other foundations and government agencies. Among the effects of this change was a sharp reduction in its mineraleconomics research. Parallel developments: government agencies Governments have altered both the substance and form of mineral policy. In the United States up to the 1970s, the Department of the Interior (DOI) was the only federal cabinet agency with substantial mineral responsibility. This was split among three divisions—the Geological Survey, the Bureau of Land Management, and the Bureau of Mines. The first dealt with mineral endowment and other geological questions; the second oversaw the use of the majority of the federal government’s large land holdings; the last was engaged in research, data gathering, and regulation of minerals broadly defined. Governments of other developed countries also increased their mineral expertise and research in the years 1

For more on the research program at RFF during its early years and for references to the many books it published in the field of mineral economics, see Resources for the Future (1977).

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right after World War II. In Europe and Japan, these public programs were largely dismantled in the 1980s. In Canada and Australia, however, early efforts were maintained and are found today in Natural Resources Canada and the Australian Bureau of Agricultural and Resource Economics (ABARE). These agencies along with newer ones in developing producing countries, such as Cochilco (the Chilean Copper Commission), today support a wide agenda of research in the field. In the 1970s, predominantly in energy, a mind-numbing succession of policy changes occurred in the United States. Protection for the high-cost domestic petroleum producers ended. In response to the price increases engineered by OPEC, the government first introduced price controls and then excise taxes on domestic petroleum producers.2 In an unintended and perverse manner, these measures actually constrained domestic energy production and fostered higher oil imports. As a result, many of these controls and regulations were subsequently abolished. Nevertheless, U.S. energy policy continues to be characterized by an assortment of regulations, subsidies, and studies for all areas of energy. Nonfuel minerals also endured considerable intervention. Periodically, the country restricted steel imports. It built up stockpiles of numerous materials considered critical or strategic. It offered production incentives for various metals and at times imposed price controls. The Department of Energy was created with an Energy Information Administration (EIA) to improve the collection and reporting of energy data, maintain the forecasting efforts developed by the Federal Energy Administration, and conduct independent analysis of energy problems. At its highpoint, EIA maintained statistical reports far more elaborate than the Bureau of Mines (BOM) had provided on various mineral fuels and electricity, though this activity has since been curtailed. Starting in the 1970s, the government in a series of steps reduced the scope of BOM’s activities. The creation of a Department of Energy (DOE) involved the total transfer of energy data gathering and much of the energy research to DOE. BOM’s regulation of mine safety ceased with the creation of a separate Mine Safety and Heath Administration. These last activities were ultimately placed in the Department of Labor. When legislation established federal oversight of the effects of surface coal mining, Congress entrusted control to a new DOI branch. The final blow occurred in 1996, when the government abolished the BOM. At the time, its data-gathering responsibilities were placed in the Geological Survey, the agency that had actually originated these 2 These were called excess profits taxes. However, costs were not considered directly. Taxes were levied on the differences between actual prices and an allowable price specified in the legislation. To adjust crudely for cost differences, production was divided into different categories subject to different allowable prices. Higher allowable prices and thus lower tax bases and lower tax rates were applied to categories considered higher cost.

activities before the BOM was created and assumed control. In recent years, budget cuts have forced the Geological Survey to reduce these efforts.

Research agenda Research in the field of mineral economics has focused on the important public and private policy issues of the day. In the decades after World War II, the following topics received the lion’s share of attention:

       

Mineral commodity market analysis, including price and demand forecasts. Project evaluation using discounted cash flow and other financial tools. International mineral companies and their relations with the host countries in which they operated, including taxation issues. Strategic and critical materials from the Middle East, southern Africa, and the Soviet Union. Depletion and the long-run availability of mineral commodities. Monopoly and antitrust policy in the petroleum, aluminum, steel, and other mineral industries. Regulation of the energy industries. Commodity agreements and in particular the International Tin Agreement.

Interestingly, this work drew upon a number of conceptual and theoretical developments in economics and other related disciplines. Among the more important were: (1) The revival and extension of Fisherian capital theory as a useable tool for applied financial analysis. (2) The maturing of exhaustion theory from the early efforts of Gray (1914) and Hotelling (1931) to the elaborate models of the 1970s.3 (3) The development of a modern theory of externalities and their control, including the enormously influential characterization of when externalities are policy relevant by Coase (1960). (4) Advances in industrial organization as a specialization using economic theory to assess the performance of industries and their regulation.4 (5) Finally, vigorous theoretical and empirical work on international economics and development economics. 3 Natural resource economists in the 1960s relaxed many of the restrictive assumptions of the earlier work and in the process made critical contributions that greatly extended the theory. Numerous surveys of the literature are available. Baumol and Oates (1975), a text on environmental economics, includes a good survey of exhaustion theory but only in its first edition. Other simple surveys are found in Gordon (1981) and Bohi and Toman (1984). Dasgupta and Heal (1979) probably provides the fullest available review, but it is quite complex. 4 The pioneering case studies at Harvard that established the field of industrial organization included Wallace (1937) on aluminum and Bain (1944) on oil. M.A. Adelman was teaching industrial organization at MIT when he undertook his studies of petroleum (see, for example, Adelman 1972, 1993, 1995) and motivated MIT’s extensive involvement in energy.

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Recent years: the 1980s to the present Over the years, the field of mineral economics has evolved in two important respects. First, the geographic location of teaching and research has shifted from the United States (which, as noted earlier, was largely behind the emergence of mineral economics as a separate specialty) towards producing countries. Second, the research agenda has changed. Geographic location Interest in the field of mineral economics in the United States has waned in part because its domestic-mining industry has over time become less important, at least with respect to the economy as a whole, and shifted location. Coal production, for example, has expanded in the Rocky Mountain states, particularly Wyoming, while declining in Appalachia. The general decline and reorientation of the earth science and mineral engineering schools in which mineral-economics programs have resided have also been contributing factors. Resources for the Future continues to thrive but by focusing on global warming and other policy issues for which outside funding is more readily available. Little of its research is currently in the field of mineral economics. In the 1990s, the Department of Mineral Economics at The Pennsylvania State University was renamed the Department of Energy, Environmental, and Mineral Economics to make explicit the breadth of the program. Even so, the University abolished the department in 2002. At the time, the department was offering a minor in energy business and finance whose persistent success led to its transformation into a full-fledged undergraduate major, similar to the discontinued BS degree in mineral economics though without a focus on nonfuel mineral commodities. Even earlier the graduate mineral-economics program at the University of West Virginia was absorbed by the agricultural-and-resource-economics program. The University of Arizona scattered its three faculty members among three departments. The programs based on a single faulty member also largely vanished. The Michigan Technological University has recently changed the name of its degree from mineral economics to applied natural resource economics. The program does, however, continue to have a major mineral-economics component. This leaves the Colorado School of Mines as the only university in the United States still offering degrees (M.S. and Ph.D. degrees) in mineral economics. Simultaneous with its decline in United States, the field of mineral economics has experienced growing interest in producing countries. Students can now earn degrees in mineral economics from the Curtin University of Technology in Australia, the University of the Witwatersrand in South Africa, the Catholic University of Chile, and the University of Chile—most of these programs have been initiated since 1993. With the exception of the Catholic

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University of Chile, these programs are taught in concentrated sessions to accommodate students working full time in the industry, rather than as standard academic programs. In addition, the University of Dundee in Scotland offers a program in mineral law with a significant focus on mineral economics. It is also important to note that government agencies in producing countries, including Natural Resources Canada, the Australian Bureau of Agriculture and Resource Economics (ABARE), and the Chilean Copper Commission (Cochilco), today support a wide agenda of research in the field. Research agenda Since the 1980s, mineral economics has continued to maintain a strong interest in market analysis (particularly price and demand projections) and project evaluation, as these activities have remained important for producing companies and the private sector more generally. Relations with host governments and countries have also remained of considerable interest due in large part to the evolving role of host governments. The petroleum sector witnessed the nationalization of oil operations throughout the Middle East and in Venezuela in the 1970s. The metal industries experienced a wave of nationalizations as well, starting even earlier in the 1960s, though this trend was largely reversed by the privatizations of the 1990s. Other significant changes have also occurred over the past several decades, including a growing disenchantment with government regulation. Yet in the energy sector, pervasive regulation persists. Continued political unrest in oil exporting countries and fears of global warming have made ending ‘‘addiction to oil’’ a slogan adopted on a nonpartisan basis by politicians and others in the first decade of the 21st century. In the realm of metals, major changes over the past several decades include the demise of the International Tin Agreement and UNCTAD’s Integrated Programme for Commodities, the persistent long-run downward trend in real prices for many mineral commodities (though the recent rise in commodity prices has some suggesting the trend is now rising), the collapse of the Soviet Union and the end of the Cold War, the integration of China and other former centrally planned states into the global economy, and the growing competition in many mineral markets. These changes have lessened concerns about monopoly and market power, about mineral depletion, and about strategic and critical materials—all major research issues during the first decades following World War II. As interest in these topics has waned, the discipline has redirected its attention toward a new set of concerns:



The environmental effects of extraction, processing, and use of minerals, and the role of government policy and corporate responsibility for controlling them.

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The impact of mining and energy production on indigenous people and local communities. The role of mineral exploitation in economic development, including issues surrounding the resource curse, the Dutch disease, and the links between mineral wealth on one hand and corruption and conflict on the other. China, India, and the growing global competition for mineral resources.

All of these issues are closely associated with the concept of sustainable development. For many, sustainable development is now the overriding guiding principle for public policy. For others, the concept is too ambiguous in practice to be useful. These new research issues, it is worth noting, are of greater concern to mineral-producing countries than the earlier topics that they have replaced. This presumably helps explain the shifting geographic location, noted earlier, of the discipline from the United States to major producing countries. Other contributing factors are important as well, including the major role that the mineral sector plays in the economies of many producing countries and the natural tendency for suppliers and support services (including education and research) to follow with a lag the shifting location of primary production. Simultaneously, the growing belief that mineral commodities are readily available in sufficient quantities, fostered in large part by long periods of declining prices and excess capacity, has undermined interest in mineral economics in the United States and other consuming countries. The future The present and the past are easier to document and describe than the future. Still, a few concluding observations about the future are worth considering. First, as long as consuming countries need mineral commodities to sustain their modern standard of living, as long as mining and mineral processing play a major role in the economies of producing countries, and as long as firms and the private sector in general need market analyses and project evaluations, there will be a need for mineral economics. The waning of mineral economics in the United States, as we have seen, reflects a geographical shift of interest in the field, fostered in part by evolving public concerns, and has been offset by rising interest elsewhere. Second, the history of mineral economics over the past half century shows that the public concerns governing the level and direction of research in mineral economics, as in other fields, are not fixed. Thanks to political and other developments, consuming countries worry much less about the availability and security of at least their nonenergy mineral supplies today than they did three or four decades ago. This could change, however. Indeed, though it is still too early to know, many now claim that the sharply higher mineral-commodities prices of the past several years do not reflect just another cyclical fluctuation around a continuing

downward secular trend. Rather, they portend a reversal in the downward trend with increasing mineral scarcity on the horizon. In another area, the recent merger wave in the mineral sector, if it continues, may well resurrect concerns about monopoly and uncompetitive markets. Similarly, growing mineral consumption in China, India, and other developing countries already has some pondering the implications for mineral supplies in the traditional consuming countries. The rise of China as an exporter has as well inspired calls for protection. As a result of such developments, the United States and other consuming countries could discover a renewed interest in mineral economics in the coming years. Third, the interest of producing countries in mineral economics will persist over the foreseeable future. The environment, indigenous people and local communities, and the other issues of concern to these countries discussed earlier are unlikely to disappear soon. All of which suggests that the locus of interest and the research agenda of mineral economics is likely to evolve in the future, just as it has in the past, but that the discipline will continue to have an important role to play in analyzing the pressing economic and policy issues of the day associated with mining and the use of mineral commodities. Acknowledgments We gratefully acknowledge two papers by John J. Schanz, Jr. (no date, 2006), two papers by Philip Maxwell (2006, Chapter 1, 2007), and comments from Schanz and Richard T. Newcomb in preparing this overview of the field of mineral economics. We are also keenly aware of the difficulties of providing a comprehensive review of an entire discipline, and recognized this overview has a North American perspective. We would welcome hearing from readers who feel we have failed to identify adequately important developments in the field. References Adelman, M.A., 1972. The World Petroleum Market. Johns Hopkins University Press for Resources for the Future, Baltimore. Adelman, M.A., 1993. The Economics of Petroleum Supply: Papers by M. A. Adelman 1962–1993. The MIT Press, Cambridge, MA. Adelman, M.A., 1995. The Genie out of the Bottle: World Oil Since 1970. The MIT Press, Cambridge, MA. Bain, J.S., 1944. The Economics of the Pacific Coast Petroleum Industry. University of California Press, Los Angeles. Barnett, Harold J., Morse, Chandler, 1963. Scarcity and Growth: The Economics of Natural Resource Availability. Johns Hopkins Press for Resources for the Future, Baltimore. Baumol, William J., Oates, Wallace E., 1975. The Theory of Environmental Policy: Externalities, Public Outlays, and the Quality of Life. Prentice-Hall, Englewood Cliffs. Bradley Jr., Robert L., 2007. Resourceship: an Austrian theory of mineral resources. The Review of Austrian Economics 20 (1), 63–90. Bohi, D.R., Toman, M.A., 1984. Analyzing Nonrenewable Resource Supply. Johns Hopkins University Press for Resources for the Future, Baltimore.

ARTICLE IN PRESS R.L. Gordon, J.E. Tilton / Resources Policy 33 (2008) 4–11 Coase, Ronald H., 1960. The problem of social costs. Journal of Law and Economics, 3, 31–44. Reprinted in Coase, Ronald H., Breit, William, Hochman, Harold, M. (Eds.), 1968. Readings in Microeconomics. Holt, Rinehart and Winston, New York, pp. 423–456. Dasgupta, Partha, Heal, G.M., 1979. Economic Theory and Exhaustible Resources. Cambridge University Press, Cambridge. Gordon, Richard L., 1967. A reinterpretation of the pure theory of exhaustion. Journal of Political Economy 75 (3), 274–286. Gordon, Richard L., 1981. An Economic Analysis of World Energy Problems. The MIT Press, Cambridge, MA. Gray, L.C., 1914. Rent under the assumption of exhaustibility. Quarterly Journal of Economics 28 (2), 466–489 Reprinted in Mason, Gaffney (Ed.), 1967. Extractive Resources and Taxation. University of Wisconsin Press, Madison, pp. 423–446. Hotelling, Harold, 1931. The economics of exhaustible resources. Journal of Political Economy 39 (2), 137–175. Koopmans, Tjalling C., 1974. Ways of looking at future economic growth, resource and energy use. In: Macrakis, Michael S. (Ed.), Energy: Demand, Conservation, and Institutional Problems. The MIT Press, Cambridge, MA, pp. 3–15. Krautkraemer, Jeffrey A., 1998. Nonrenewable resource scarcity. Journal of Economic Literature 36 (4), 2065–2107.

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