The Demand for Natural Resources Revisited

Abstract

Abstract Two models for explaining the demand for natural resources are developed for the period 1900–1969. The first model relates demands for total natural resources and five sub-categories to the size of the economy, real prices, and the state of technology. The second model relates the intensity of use of resource categories and sub-categories to real prices and technology. The major findings are that the United States has been using raw materials more efficiently through time during this century and that the current state of the data base is not sufficient to choose between alternative hypotheses of the determinants of intensity of use. Directions of future work are indicated. PART 1 PART 1 OVERVIEW The subject of raw material demands with respect to economic growth has become an increasingly important one, especially in the area of energy. In 1974 in a paper presented before the Council of Economics, Dr. Malenbaum proposed a law of demand for minerals, including proposed a law of demand for minerals, including fuels. His thesis was that the intensity of use of a mineral; i.e., consumption of the mineral per unit of gross national product (GNP), is a function of GNP per capita. Further, he stated that the shape of this function was an inverted "U"; that is, as per capita GNP increased, consumption per unit of output for a mineral would increase, reach a maximum, and then decline. The data lying behind the Malenbaum hypothesis related to specific mineral commodities, such as copper or iron and steel, and his reported data covered a short span of time. In an earlier article, I (the senior author) explored the Malenbaum hypothesis. I concluded that a metal by metal analysis of intensity of use through time is most likely picking up substitution phenomena rather than fundamental tendencies phenomena rather than fundamental tendencies in the demand for total raw materials. This is illustrated clearly when one puts in juxtaposition the trends for aluminum and copper, and combines them in terms of relative weights. Further, the shift from goods to services is not necessarily a raw material saving shift. Thus, changes in the composition of GNP as per capita income rises may not be an adequate explanation for the inverted "U" posited by Malenbaum. I concluded my posited by Malenbaum. I concluded my examination of Malenbaum as follows: " My preliminary work leads me to believe that the major phenomena that must be understood are the process of substitution and the relationship of materials demands to technological progress.