Frontiers in Resource and Rural Economics

Human-Nature, Rural-Urban Interdependencies

Wu JunJie, Paul W Barkley, Bruce A Weber, Wu JunJie, Paul Barkley, Bruce Weber, Paul W Barkley, Bruce A Weber

• Publisher: Routledge
• Year: 2010
• eBook ISBN: 9781136525841
• Topic: Law
• Subtopic: Environmental Law
• Index: Law

Most land in the United States is in rural areas, as are the sources of most of its fresh water and almost all its other natural resources. One of the first books to approach resource economics and rural studies as fundamentally interconnected areas of study, Frontiers in Resource and Rural Economics integrates the work of 18 leading scholars in resource economics, rural economics, rural sociology and political science in order to focus on two complex interdependencies-one pertaining to natural resources and human welfare, the other to urban and rural communities and their economies.

The book reviews the past 50 years of scholarship in both natural resource and rural economics. It contrasts their different intellectual and practical approaches and considers how they might be refocused in light of pressing demands on human and natural systems. It then proposes a 'new rural economics' that acknowledges the full range of human-ecosystem and urban-rural interdependencies. It explores the relationship between natural resources and economic growth, and considers the prospects for amenity-driven growth that would benefit both new and traditional inhabitants of rural areas. Later chapters explore the politics of place, spatial economics, strategies for reducing rural poverty, and prospects for linking rural and environmental governance. Throughout, the book emphasizes innovative research methods that integrate natural resource, environmental, and rural economics.

CHAPTER 1

Frontiers in Resource
and Rural Economics

A Synthesis

Emery N. Castle and David E. Ervin

A N INEVITABLE TENSION exists between those who make use of natural resources to produce food, fiber, timber, energy, and minerals, and those who look to the natural environment for ecosystem services, such as natural amenities and recreational experiences. Tensions also arise on the rural-urban interface. Few deny that goods, people, and services need to move freely between rural and urban places, yet conflicts abound. Expansion of cities and suburbs may require conversion of farmland. Public programs intended for everyone may not work well for some unless explicit attention is given to human population density. Studies about resource-based economies or rural economies and rural people that make no reference to environmental effects or urban affairs clearly are doomed to irrelevance.

Resource economics and rural economics, as fields of study, have different intellectual traditions. Resource economics, a recognized specialization within economics, rose to prominence after the first Earth Day in 1970. Its literature reflects rigorous economic theory and sophisticated quantitative techniques. Rural economics generally is viewed as a part of the multidisciplinary field of rural studies, involving such disciplines as regional science, sociology, and political science. Within economics, rural economics is grouped with, and parallel to, regional and urban economics.

Despite those differences, there is substantial overlap in substance between the two. More than 95 percent of the land area of the United States is classified as rural. Most of the nation's natural resources and environmental amenities are found in rural areas, with their agricultural and forested lands, water resources, flora and fauna, open space and skies, minerals, and natural beauty. The rural environment provides the bulk of ecosystem services of value to both urban and rural populations. Obviously, both urban and rural people have an interest in the management of, and access to, rural natural resources. Global and domestic economic progress places stress on both natural and human resources. The young migrate in great numbers to urban places as the relative income of rural people continues to decline. Urban development and suburbanization often encroach on and sometimes swallow rural communities. Such processes—and others treated elsewhere in this book—make clear that the study of rural economic welfare in isolation from urban affairs makes little sense.

The identification of tensions is not difficult. Nor does it require great originality to describe interdependencies that give rise to such tensions. It is a different matter to suggest solutions to the economic and social problems that stem from these conditions. The objective of this book is to identify specific areas for study within resource and rural economics and describe analytical approaches that will address the complex social and economic paradoxes inherent in these fields of study.

Part I. The Past 50 Years

We start by considering the insights afforded by past scholars—and the limitations of existing research. The built environment, enhanced human capital, and intellectual contributions constitute endowments as people and communities move from one time period to another. Path dependence often results because of the understandable human desire to use what is available, rather than begin anew. Yet in some circumstances, starting fresh is best. The editors asked Daniel Bromley and Paul Barkley to review resource and rural economic literature and appraise the intellectual legacy of each field. What parts should be used, and what supplemented? And if modification is attempted, can past mistakes be avoided?

Much of the literature in resource economics addresses the shortcomings of markets for some natural resources situations. In capitalist economies that rely heavily on markets, many natural resource problems often are considered exceptions and equated with market “failures.” Under such circumstances, attempts are often made to estimate market outcomes if such failures did not exist. Benefit–cost analysis was invented to discover a simulated market solution when decentralized markets do not work well. Welfare economics, quantitative techniques, and the ability to process large amounts of data have made it possible to estimate alternative possible outcomes for many troublesome natural resource issues. It is not surprising that some such “solutions” would be advanced as a basis for public policy decisions.

Bromley, in Chapter 2, has provided a comprehensive review of resource and environmental economics literature from 1950 to 2000. He refers to attempts in resource economics to simulate market solutions when market failures occur as the “commodification” of nature. He expresses concern about reliance on normative analytical frameworks, such as benefit–cost analysis, for policy purposes. He notes the increasing popularity of the journal Ecological Economics, which emphasizes human system and ecosystem interactions. In contrast to Ecological Economics, Bromley states, the traditional resource economics approach to human and natural system interactions depends on motivations of self-interest, utility maximization, and rationality. He urges resource economists to reflect empirical conditions in their models to more accurately capture nature-human interdependencies. Readers are encouraged to keep Bromley's concerns in mind when they turn to Chapter 4, which describes the shift in emphasis in resource economics since this field of study first emerged a half-century ago. Whereas early effort directed attention to market failures in particular locations or specific situations, today awareness is emerging about relations between large systems. As a result, analytical problems of a different sort are coming to the fore.

In his review of rural economics literature in Chapter 3, Paul Barkley observes that both economists and sociologists have created a vast literature that provides empirical information about rural people and their problems. Some of that literature has been concerned with rural-urban economic interactions. Even so, many highly competent researchers have failed to create analytical frameworks that can be used for policy prescriptions to resolve rural-urban stresses that arise as economic development occurs. Although he does not use the term, readers may conclude that “a vast wasteland” would be an apt description of this field. Barkley identifies intermediate decisionmaking, natural amenities, migration, and the use of geographic space as worthy subjects for investigation—topics taken up in Chapters 5, 6, 7, 11, and 12.

The intellectual endowments of resource and rural economics are a study in contrasts. Resource economics is cited for a too-close adherence to the basic axioms of economics and neglect of actual environmental conditions. The rural economics literature is criticized because economic theory has not worked well and a conceptual framework is lacking. These contrasting characteristics receive serious attention in subsequent chapters.

Part II. Nature-Human and Urban-Rural Interdependence

V. Kerry Smith and Jared C. Carbone provide a fundamental examination of economic and ecosystem relations in Chapter 4. They consider the familiar subject of externalities (effects that are not properly valued by decentralized markets) in an unconventional way. The conventional wisdom holds that all goods are substitutes, and that the source and incidence of all environmental insults can be known. The conventional wisdom also holds that all polluting activities can be remedied by government action, perhaps with taxes or subsidies. Much environmental economics is concerned with partial equilibrium models that isolate individual producers and consumers from the remainder of the economy or ecosystem, with damage functions flowing only in one direction. Under such assumptions it may be logical to attempt some form of aggregation of partial equilibrium results to predict economy-wide effects.

Yet ecologists direct attention to the cumulative effects of incremental decisions on nature. Further, economists know that all goods are not substitutes—some are complements. Economists know a great deal about general equilibrium modeling, but they know less about modeling the cumulative ecological consequences of incremental economic decisions. What if the actions of producers affect one another, and producer and consumer actions have reciprocal effects? In the words of Smith and Carbone,

We don't know the details of how people's choices are affecting the ability of these assets to provide services. Moreover, there is no information to allow analysts to select among the alternative descriptions linking activities that damage ecosystem services to the objects of choice that people use and care about. … Measures of the general equilibrium implications of policy choices are likely to be dramatically affected by the decisions about how to characterize nonmarket environmental services.

Daniel Bromley (Chapter 2) and Kathleen Segerson (Chapter 13) also direct attention to this view of nature-human interdependence, a central feature of resource economics.

The policy implications of the Smith and Carbone paper are profound. Their nontraditional view of environmental externalities suggests that the quest for benefit–cost solutions to important environmental questions may be misdirected. Their contribution promises to stimulate alternative approaches to this set of fundamental problems.

Maureen Kilkenny's Chapter 5, “The New Rural Economics,” sets forth an economic disciplinary focus for rural economic research. She dissects the “old” and “new” economic geography models to show their strengths and limitations and extends that literature to reflect recent theoretical developments. She describes a conundrum, first identified by Edwin Mills, that neither the old nor the new economic geography readily resolves: how to achieve stability, over time, in the rural share of nonfarm employment despite the massive exodus of labor from agriculture, especially during the 20th century. She concludes that the new rural economics must place more emphasis on spatial microfoundations, demand-side ideas, and empirically tested models. This will provide opportunities for greater collaboration between rural and environmental economists and advance understanding of both nature-human and urban-rural interdependence. Her chapter sketches out an agenda for the necessary research.

In Chapter 6, Elena G.Irwin, Alan Randall, and Yong Chen are concerned with the extent to which natural amenities can affect the location of economic activity, both in central places and on the periphery. Traditional modeling efforts have neglected the location effects of qualitative, typically nonpriced features of the environment. These scholars recommend that attention be given to how the passage of time affects amenities, as well as to investments that enhance natural amenities and create social amenities.

JunJie Wu and Sanjiv Mishra, in Chapter 7, report empirical findings from their investigation of natural amenities, human capital investment, human migration, and economic growth in the Pacific Northwest. Locations with better natural amenities, larger expenditures on education, and higher rates of homeownership have attracted migration. They conclude that natural amenities and human capital are major drivers of economic growth and recommend that future research focus on the interaction between firms and households as location decisions are made, as well as between private and public policy decisions. These results direct attention to the relation of rural environmental quality to urban development patterns.

Part III. Policies and Programs for People and Places

The United States cannot be said to have a comprehensive, place-based public policy. In the 19th century, the nation sought to settle its vast undeveloped areas, and many policies were designed to serve that end. Remnants of those policies remain but with little relevance to contemporary issues. Even so, policies for universal application, administered uniformly, often have differing consequences when population density varies. Policies intended for everyone, then, often serve rural people and places imperfectly. The five chapters that constitute this section give explicit attention to how public policies reflect nature-human and urban-rural interdependence—a generally neglected subject. The subjects addressed—poverty, education, and taxation and redistribution—are very different, but the problems are common in rural places, and important to urban people as well.

Bruce Weber, in Chapter 8, writes one of the more comprehensive statements about rural poverty available. He relates poverty to location and identifies characteristics of places where poverty is most prevalent. Although poverty is not randomly distributed, national poverty programs are location blind, raising the question as to whether poverty programs should focus on people or places. Weber reviews the arguments and concludes that both should be taken into account. His chapter includes observations about social capital, natural resources, and intermediate decisionmaking.

Chapter 9 presents research results that pertain to rural education. Because rural young people migrate in great numbers to urban places, the quality of the education they receive is important to both urban and rural people. Professional educators have written and spoken a great deal about the minimum school size necessary for quality education. Maureen Kilkenny and Monica Haddad, taking a fresh look at this issue, agree that size does matter: the larger the group, the more likely a student will have peers who set a standard higher than the student has been able to attain—a “horizon” effect. However, standard-setting peers need not be of the same age or class. The one-room country school may not have been so bad after all. School consolidation may not always be necessary to attain quality education. Kilkenny's and Haddad's imaginative use of an extensive data set brings fresh insight to a long-standing issue in rural public policy.

Mitch Kunce and Jason F. Shogren, in Chapter 10, report the results of their investigation of property taxation and the distribution of rural resource rents. Their sophisticated analysis reveals that tax incentives are poor instruments both for increasing coal production and for fixing the location of coal extraction activities. The economic rent from coal extraction made possible by tax incentives tends to accrue to coal extraction firms rather than elsewhere in the private sector. However, the new growth theory discussed by Kilkenny (Chapter 5) explains why additional economic activity is so attractive to many rural places. Extractive resource management clearly affects nature-human interactions in rural places and provides another dimension of how the relative uniqueness or comparative advantage of particular places may be managed. This subject clearly is central in much rural economics, as discussed in Chapters 5, 8, and 12.

In Chapter 11, Ronald Oakerson describes how political systems reflect interdependence between rural and urban resource users and between rural and urban economies. Instead of the micro-macro distinctions familiar in economic theory, we see a continuous range of decisions at different levels of aggregation, always involving both individuals and groups. Oakerson collapses the values of a geographic place inhabited by humans to two: community and the environment. He notes that social capital creates and sustains good will among community members as they address problems. A multiplicity of objectives requires “multiple agency” involvement at all levels of government as well as by nongovernmental organizations and private citizens. The policy arena is the place where community and environmental values are harmonized at various levels of decisionmaking. And this is the setting within which resource and rural economists must collaborate if they wish to deal with the tensions that shape public policies. Oakerson's chapter provides a backdrop for the research results on intermediate decisionmaking reported in Chapter 12.

Emery N. Castle, in Chapter 12, adopts a methodological view of resource and rural economics, facilitating generalizations about the frontiers of resource and rural economics. Both resource and rural economics historically have been receptive to fundamental discoveries in their parent discipline of economics, and effort should be made to maintain this relationship. Both fields, he argues, will benefit from maintaining economics as a separate science, even as both will also be enhanced by collaboration with other disciplines, and additional integration of rural and resource economics is likely to occur. Neoclassical economic theory has traditionally neglected intermediate political decisionmaking, limiting its usefulness in rural economics. This chapter identifies conceptually, and illustrates empirically, the necessary and sufficient conditions required if intermediate decisionmaking is to be incorporated in neoclassical economic decision theory.

Part IV. The Next 25 Years

In Chapter 13, Kathleen Segerson provides a truly in-depth view of potential contributions of resource and environmental economics. The research agenda she advances focuses on nature-human interdependence (in common with Bromley, Chapter 2, as well as with Smith and Carbone, Chapter 4), land use conflicts, and opportunities for greater cooperation between private parties and regulators. She recommends an agenda that requires a fresh view of externalities, a decreased emphasis on efficiency per se, and greater emphasis on better understanding of incentives and sustainability. Throughout the chapter she calls attention to the great uncertainties that surround the choices to be made....

Table of contents

• Front Cover
• Title Page
• Copyright
• About Resources for the Future and RFF Press
• Contents
• Preface
• Contributors
• 1. Frontiers in Resource and Rural Economics: A Synthesis
• Part I.The PAST 50 YEARS
• Part II. HUMAN-NATURE AND RURAL-URBAN INTERDEPENDENCE
• Part III. POLICIES AND PROGRAMS FOR PEOPLE AND PLACES
• Part IV.The NEXT 25 YEARS
• Index