Natural Resources

George F. Ray

National Institute Economic Review, 1986, vol. 118, issue 1, 53-58

Abstract: The five articles that follow attempt to look ahead to the 1990s. They explore questions normally begged in short- term modelbuilding and forecasting. One fundamental issue, addressed in the first article, concerns potential world supplies of energy and raw materials. Will these be ample for continued industrial expansion, or will the drain on depletable natural resources lead before the end of the century to physical shortages or sharply rising costs? The other articles are concerned with long-term developments in the domestic economy. Two basic questions are: what resources will be available overall, and how will these be used? The first of these questions is concerned with the prospects for economic growth. While it is usual in short- term analysis to treat changes in output as arising largely from changes in demand, analysis of long-term trends has rather to be directed towards factors underlying the potential growth rate—trends in the supply of labour and its productivity. It is necessary to stress the many uncertainties which surround projections of economic growth so far into the future. But it is possible to form some judgement about the potential growth rate which it is plausible to assume in the light of past trends and likely future developments (for example, slower growth in the population of working age and declining North Sea production). Once a view has been taken on the total supply of additional real resources that might be made available by economic growth, attention turns in the third article to the various demands on these resources. For a given rate of economic growth to be sustained, investment is required which has to be matched by saving. Subject to the demands of the balance of payments, the remainder of the resources created by growth is available for total current consumption. Trends in public expenditure and taxation determine how this total is divided up between public and private use. The fourth article considers the likely industrial pattern of output growth given an overall growth rate and changes in the pattern of final expenditure. It is assumed that total output grows in line with potential; we have not attempted to forecast unemployment over the long term. However, the last article in the series discusses, in general terms, the prospects for a faster growth of output and fuller utilisation of the supply of labour. The research was financed by a grant from the ESRC, which is gratefully acknowledged.

Date: 1986
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