Mineral economics

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CHAPTER 1

Mineral Economics — An Introduction
Philip Maxwell

Definitions of Economics and the Economic Way of Thinking Economics and Mineral Economics The Focus of Mineral Economics Some Key Questions in Mineral Economics The Structure of this Volume

DEFINITIONS OF ECONOMICS AND THE ECONOMIC WAY OF THINKING
Economics, and the economic way of thinking, have had an importantinfluence on business and government affairs for at least the last two centuries. The Scottish author Adam Smith espoused the foundations of modern economic thought in 1776 (Smith, 1976 [1776]). His famous volume – The Wealth of Nations1 – ushered in a revolution in economic thinking. His ideas formed the basis of the new academic field of political economy, which writers such as William StanleyJevons renamed as economics some 100 years later. In the early pages of his book, The Worldly Philosophers, Heilbroner (1972) traces the rise of economics to the emergence of the market system in the wake of the Industrial Revolution, which began in the middle of the 18th century. Prior to that time, the organisation and survival of society had largely depended on tradition and authoritarian rule. Thediscipline of economics developed strongly during the 20th century, with economists applying its principles to many areas and industries. One of these industries was mining. For at least the last 50 years, undergraduate students in mining engineering programs around the world have taken one or more courses in mineral economics or engineering economics as part of their curriculum. Graduatecoursework programs in mineral economics have also developed in a number of well-known universities. As one might expect, mineral economics is ‘the application of economics in the study of all aspects of the mineral sector’ (MacKenzie, 1987, p 2). To understand its focus more clearly, however, it is necessary briefly to consider the definition of economics, and its evolution. One of the most widely usedearly definitions of economics was that of Alfred Marshall, in his influential volume, The Principles of Economics. Marshall (1890, p 1) notes that: POLITICAL ECONOMY or ECONOMICS is the study of man in the ordinary business of life; it
1. Its full title is An Inquiry into the Nature and Causes of the Wealth of Nations (Smith, 1976 [1776]).

examines that part of individual and social actionwhich is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on the one side a study of wealth; and on the other, and more important side, a part of the study of man. This is a broad definition and, as such, it attracted debate. In seeking to clarify the nature of economics, Robbins (1932, p 16) offered a different perspective with hisso-called ‘scarcity’ definition as opposed to Marshall’s ‘materialist’ definition. This was that: Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses. Most writers of modern principles economics textbooks have embraced this scarcity definition. Without scarcity, there would be no need for markets. Everything would be freeand uncontested. It provides a reference point for new students to consider and digest the subsequent theories and models of classical and neoclassical economics, the two major schools of thought. They present it in a slightly extended version such as: Economics is the study of how people and society choose to employ scarce productive resources to produce goods and services and distribute them amongvarious groups in society (Waud et al, 1996, p 6). This is, however, not the last word. Non-traditional economists, such as John Kenneth Galbraith take an even broader view. In his volume The New Industrial State, Galbraith (1978, p 417) notes that: In economics:
• Economic theory – the study which deals with the way prices, output and incomes of individuals, firms and the economy at large are...