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Contrary to population-caused visions of scarcity (Malthusian or otherwise), thinking economically suggests that scarcity does not set the limits of the relations between society and environment, but instead operates as the engine of their interaction. Here, scarce resources are made available, or indeed abundant, through the working of supply and demand, which inspires the creative potential of human imagination to be unleashed by economic incentives.

In this way of thinking, available resources, because they are valuable, are exploited and used for social good. Oil is burned to propel cars that take people to work, landfills are made to dispose of waste far away from populations, and vegetables are consumed to maintain people’s health. Exploitation of environmental goods, even renewable resources like forests or fisheries, does tend to decrease their supply (just as any good Malthusian would insist!). But when things become scarce, their price in a market tends to rise; consider: people pay more for gold than lead. This increase in prices, rather than spelling immediate or imminent ecological disaster, presents producers and consumers with new and interesting choices (Figure 3.1).

Figure 3.1 Environmental scarcity drives markets. Shell gas station operator Steve Grossi’s gasoline price board at his Shell station in Huntington Beach. Source: REUTERS/Robert Galbraith.

For producers, the increase in prices may open up innovative opportunities for finding new sources of resources or developing new technologies to extract, produce, or synthesize environmental goods, including those techniques previously too expensive, relative to the price of the resource, to consider.

In the southwestern United States, for example, where it had dominated for a century, copper mining came to a sudden halt in the 1960s and 1970s. Mineral stocks had become too diffuse to merit the expensive effort of extracting them from the ground, where only traces remained. But when the price of copper rises, as it has in the last years of the first decade of the twenty-first century, applying more expensive extraction techniques to long-dormant surface mines begins to become profitable, leading to renewed mining and increased supplies.

Similarly, as the price of one good rises relative to the price of a less frequently used alternative, people might turn to this alternative as a cheaper substitute. History is full of such substitutions, from whale oil being replaced by carbon mineral oils to copper pipes giving way to polymer plastic ones. Innovations driven by such responses to scarcity create new economies in themselves, employing technicians, workers, and designers in new, previously unimagined production systems.

Producers and suppliers are not the only creative actors in such markets for environmental goods. Those who consume these goods, either firms that need them for production or individual people, also respond to prices. For consumers, an increase in the price of a good typically leads people to use that good less – decreasing demand. They may reuse or recycle the goods they have already used, come up with new substitutes of their own, or increase their efficiency of use. If the price of water rises to a point where it is too expensive to water the garden, consumers might abandon outdoor plants, substitute less water-demanding species, or reuse the “graywater” from their washing machine and sink to care for their landscape. All of these efforts at conservation, it should be noted, are driven not by altruism or green sensibilities, but rather by a simple response to market forces.

Market Response Model A model that predicts economic responses to scarcity of a resource will lead to increases in prices that will result either in decreased demand for that resource or increased supply, or both

This process, where scarcity is relieved by laws of supply and demand, which together govern and sustain the relationship of people to nature, is what resource economists and geographers call the “market response model” (Figure 3.2). Here, price signals are translated into adaptations by rational and creative people in the market, providing abundance under conditions of scarcity (or mitigate environmental risk, see Box 3.1). It is this logic that apparently allowed Simon to prevail over Ehrlich in their 1980 bet.

Figure 3.2 The market response model. In theory, scarcity of environmental goods and services sets into motion a series of adaptations to rising prices, actually resulting in increasing resource availability. Source: Adapted from Rees, J. (1990). Natural Resources: Allocation, Economics, and Policy. New York: Routledge, p. 39.