Non-renewable resources and the limits of economic Growth

Seminar Paper, 2012

12 Pages, Grade: 1,0



1. Abstract, Problem Setting and Objective

2. Fundamentals

3. Meadows' Limits to Growth

4. Criticism of Meadows

5. Natural Resources in the Solow Model

6. Summary and Conclusion

7. References

1. Abstract, Problem Setting and Objective

In 1972 the Club of Rome, a group of economists mainly represented by Donella H. Meadows, published The Limits to Growth: The Club of Rome’s project on the predicament of mankind, dealing with a prediction of the world’s future in terms of the ongoing exploitation of natural non-renewable resources and their impacts on man’s living standards. The book made a deep impression on people’s minds and initiated a still ongoing discussion among politicians, environmentalists and economists. Limits to Growth (Meadows, 1972) is the center part of this term paper. The current discussion is not just about the impacts of the ongoing exploitation of non-renewable resources; it is about the methods used by Meadows as well. The objective of this term paper is to show the main results of Meadows’ book and analyze in a critical manner the methods used and their implementations, mainly concerning the criticism by William Nordhaus (1992). In order to do so there is an initial need for some general remarks on vocabulary used in the manner of this issue. This means in particular the distinction of growth against development, as well as to answer the question of what is meant by the term of sustainability. Afterwards the paper presents some main results of Meadows (1972) concerning predicted pathways of certain indicators representing man’s future living standards. Following the criticism of Nordhaus (1992) the paper continues with a comparable empirical analysis of resource price development. Afterwards the simple economic growth model by Robert Solow will be examined with respect to fixed amount of land, to show the effect-relationship between economic growth and finite land. Finally there is a summary and conclusion of the elaborated results of this term paper.

2. Fundamentals

This chapter deals with the fundamentals in order to continue with the discussion about non-renewable resources and the limits of economic growth. Distinguish between growth and development is essential. Following the dictionary distinction “to grow means to increase in size by the assimilation or accretion of materials. To develop means to expand or realize the potentialities of; to bring to a fuller, greater, or better state. When something grows it gets quantitatively bigger; when something develops it gets qualitatively better, or at least different. Quantitative growth and qualitative improvement follow different laws. Our planet develops over time without growing. Our economy, a subsystem of the finite and non-growing earth, must eventually adapt to a similar pattern of development.” (Funk & Wagnall’s, 1980). The term paper follows this definition of growth, meaning expanding quantitatively. This distinction seems intuitive and easy to follow.

The definition of the term of sustainability is more complicated. The Brundtland- Commission defines sustainability as follows: “development which meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987, p. 43). This quite general definition leaves space for interpretation. A more technical and economic perspective is taken into account looking at the realization of sustainability within the neoclassical growth model by Robert Solow. Sustainability is fulfilled by satisfaction of needs. Formally this is described with the following production function:

illustration not visible in this excerpt

where y* is optimal output per capita, к physical capital, h human capital, b knowledge or technology and и environmental capital. If this general equation holds, the term of sustainability is fulfilled as the equation does not distinguish between different generations. It is a long-term model and takes the next generation into account, too.

After introducing these fundamentals, the next section continues with Meadows’ Limits to Growth (1972).

3. Meadows' Limits to Growth

This section will introduce the main results of Meadows’ The Limits of Growth (1972). To sustain economic growth it is necessary to have two categories of conditions: social and physical necessities. Social necessities are socially related growth factors such as peace, social stability, education, employment, and technological progress. Physical necessities refer to physiological and industrial activity, which are in principle tangible and countable, such as arable land and metals, like chromium. These physical resources are mainly determining the limits of growth (Meadows, 1972, p. 45 - 46). As the amount of food available mainly limiting population growth and land being the primary resource necessary for producing food, Meadows observes the use of arable land as one of the main determining factors of population growth. Figure 1 depicts the relation between available and needed arable land.

billion hectares

illustration not visible in this excerpt

Figure 1: Arable Land (Meadows, 1972, p. 50)

On the abscissa axe a timeline is drawn from the year 1850 till 2100 and the ordinate axe is defined by a billion hectares of arable land. The upper curve describes the amount of available arable land over time. The lower curve shows the amount of land needed to feed the growing world population under the assumption of 0.4 hectares of land needed per person. It is an upward sloping curve due to an increasing world population. The upper curve is downward sloping because of the assumption that with an increasing world population there will be a loss of arable land, because of an increasing use of land for non-food essentials, like housing and streets. The straight continuing upper curve assumes that no arable land gets used for non-food essentials. In both cases the limit of feeding the world would have been reached around the year 2000. The dotted lines parallel to the lower curve allow assuming an increase in productivity in food production to double and even quadruple productivity.


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Non-renewable resources and the limits of economic Growth
University of Bergen
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Gerrit Reeker (Author), 2012, Non-renewable resources and the limits of economic Growth, Munich, GRIN Verlag,


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