I’m often asked about our consumption of natural resources, e.g., oil, iron, and copper. Since these resources are finite and population continues to grow, aren’t we in danger of running out? My short answer is no, we’ll never run out of anything that trades in the marketplace. But, we should be concerned about running out of “resources” that have no price and no owner, e.g., wild things and the ecosystems upon which they depend. Here’s why I’m concerned about the one and not the other.

Geologists define resources as the total physical stock of any material e.g., coal. In contrast, reserves are the portion of those resources that can be economically developed. Technological advances allow us to constantly move commodities from the resource category into the reserve pool.

Prices also expand our reserves, as yesterday’s high cost resources become today’s lower cost ones (e.g., Canada’s tar sands). Rising prices signal scarcity, and this creates incentives that spur conservation and the search for substitutes (e.g., silicon fiber-optic lines replaced copper phone wires to great environmental benefit).

The 20th Century is littered with predictions of the world’s imminent collapse from overpopulation, pollution, and resource shortage. A federal judge at a recent FREE conference noted, “When we see nothing but progress behind us, why should we see only destruction in front?” When institutions foster innovation and property rights are secure, scarcity never wins against creativity.

Ecologist Garret Hardin wrote his classic, “The Tragedy of the Commons” in 1968. The logic of this article is straightforward. When no one has control over a resource, be it a parcel of ocean or a dormitory lounge, it tends to be poorly maintained, overused, or depleted. This explains why prized resources, such as ocean fisheries, available to all, will be over exploited.

Without social or legal constraints, the incentive is for people to seek narrow personal advantages at the expense of the group and the resource. Few people act as wise stewards because others take a “free ride” on such actions, and rarely reciprocate.

Some common-pool resource problems, like climate change, present a great challenge. Since it is impossible to limit access to the atmosphere, a regulatory approach may be justified. For example, a carbon-tax to reduce CO2 emissions. Other open access resource problems, ocean fisheries for example, can be solved by assigning property rights to fishermen in the form of tradable quotas.

It’s a challenge to extend property rights to wildlife and their ecosystems. The traditional approach has been to create protected areas and limit human use (usually with a uniform and badge). But this frequently fails, especially in developing countries where poverty drives people to exploit the natural world and there are no institutions to foster conservation. A key to success is to structure institutions such that local people have incentives for conservation.

Over a decade ago, a group of conservationists gathered to discuss an approach that was sensitive to the aspirations of local people. They collected their thoughts in an attractive booklet, “The View from Airlie.” Conservation success often depends on the active involvement, rather than the exclusion, of local communities. They observed:

"The chief strategy of conservationists for more than a century has been exclusionary and implicitly misanthropic.... establish protected areas...and then safeguarding these areas by carefully limiting human use.... The protected-area approach...has often robbed rural communities of their traditional user-rights over forests, waters, fisheries, and wildlife, without offering appropriate remuneration."

Here’s the nugget: “Blockading rural people against the use of their own landscape without offering them viable alternatives will always, to the blockaded, seem perverse and intolerable. And will always, consequently be futile.”

Successful conservation groups understand this. For example, the Bozeman based Tributary Fund works with local communities in Mongolia to protect the Eg-Uur watershed, home of the world’s largest (and endangered) salmon, the taimen. The Tributary Fund generates incentives for environmental stewardship by employing local families in their operations, e.g., as fishing guides.

We should not be worried about running out of resources that fuel our economy. And fortunately, entrepreneurs like those at the Tributary Fund give us hope that we can overcome the other kind of resource scarcity as well.