Natural Resource Economics

The Simple Economics of Easter Island:

A Ricardo-Malthus Model of Renewable Resource

Use

Brander, J.A. & Taylor, M.S.

Objectives

1.Study a pattern of:

Economic andPopulation Growth

ResourceDegradation

Economic Decline

2. Construct a model linking population dynamics and renewable resource dynamics

3. Apply the model to the case of Easter Island

Components of the Model

1. Malthusian population dynamics: increase in productivity leads to pop growth. Pop growth might overshoot productivity gains, resulting in readjustment (boom-and-bust).

2. Open-access renewable resource: no property rights established, anyone can use the resource stock freely.

3. Ricardian production structure: production function where labour and the renewable natural resource are inputs.

A Short Chronology of Easter Island

● 400 AD: first settlements, between 20 and 100 people● 900 AD: evident deforestation● 1100-1400: most forest gone, soil erosion. Maoi carving.

Population peaked at around 10,000 people.● 1400-1500: falling food consumption. Maoi carving

stopped. Weaponry, conflict, cannibalism.● 1722: about 3,000 human inhabitants. Moai worshipping.● 1774: About 2,000 inhabitants. Maoi worshipping

stopped, statues pushed down (usually facedown)

The Model (parameters)● Production function: labour (L) and renewable

resources (S) – ecological system of soil and forest:DS/dt = G(S) – H

● Society harvests (H) the renewable resources. Society as hunters, resources as prey.

HP = αSLH

● Due to open-access, there is no rent to depletion of S.

● Biological growth follows a logistic function.

The Model (static equilibrium)

The Model (dynamics equilibrium)

● As consumption increases, net fertility increases. Positive feedback effect;

● Population growth dissipates resource productivity improvements;

● Resource depletion decreases carrying capacity.

Transition Dynamics

The Model (results)

What's different about Easter Island?● Other Polynesian island societies in the area

did not suffer such overshooting and collapse.● However, Easter Island has distinct

disadvantages:- slow growth rate of local resources- short lifespan of individuals- climate too cold- no property rights- isolation

Easter Island: a “closed” system

Source: Diamond, J. (2005) Collapse: How Societies Choose to Fail or Succeed (in Portuguese). Rio de Janeiro: Editora Record.

~2100 mi

Institutional Adaptation● Various institutional decisions could help

diminish the risk of such collapses:- Correct and agreed-upon understanding of the problem- Relevant policies affect relevant parties in a similar way (cfr. Pareto)- Low discount rates- Low enforcement costs- Trust and cohesion in the community

Collapse:How Societies Choose to Fail or Succeed

Causes of societal collapse

1. Human impact over surrounding environment

2. Climate change (natural)

3. Increasing pressure by hostile neighbours

4. Diminished support by friendly neighbours

5. Societal response to ongoing problems

Deforestation and habitat destruction

Soil problems (erosion, salinization, and soil fertility losses)

Water management problems

Overhunting

Overfishing

Effects of introduced species on native species

Population growth

Increased per-capita impact of people

Thank you all.