Conservation Policy and Capital Theory

Conservation Policy and Capital TheoryAuthor(s): Anthony ScottSource: The Canadian Journal of Economics and Political Science / Revue canadienned'Economique et de Science politique, Vol. 20, No. 4 (Nov., 1954), pp. 504-513Published by: Wiley on behalf of Canadian Economics AssociationStable URL: http://www.jstor.org/stable/138559 .

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CONSERVATION POLICY AND CAPITAL THEORY*

ANTHONY SCOTT

University of British Columbia

CONSERVATION is a word which occurs more and more frequently in politics. The "conservation of natural resources" appears both in the government ac- counts and in election speeches as a phrase which covers public spending on forests, waters, minerals, and fisheries, regardless of the ultimate purpose of that expenditure. Payments to American farmers, which enable them to achieve

higher output and receive larger incomes, are blithely described as "conservation" without reference to whether or not the transaction has increased the nation's stock of natural resources.

Conservation is a field of study for many of the sciences. Originally, I think I may say, the child of the forestry profession (indeed in the United States the

profession of forestry might almost be described as the child of the conservation movement), it has received increasing attention from many other fields. In the 1920's, conservation of oil resources became the slogan of the petroleum companies, swamped by new discoveries. They lost interest when demand increased relative to the newly controlled supply. In the 1930's, low demand for farm output, grave drought conditions, and allegedly increasing soil erosion made "conservation" a good cry for those who would give aid to agriculture. During the last war, farm specialists pushing soil conservation continued to hold the stage, but since then the public has heard increasingly from scientists and business men connected with fisheries, petroleum, water power, forestry, and even minerals. The current approach is to discuss the interrelation of the use of all the natural resources and to stress the necessity of conserving such resources simultaneously.

In this paper I wish to discuss some of the economic implications of this movement. Economists interested in monopoly and pricing practices have al-

ready studied intensively the "conservation" of petroleum and mineral stocks; and farm economists have followed closely the micro-economics of farm soil

productivity. As recent writers in the field of conservation I should mention

particularly Professors Bunce and Ciriacy-Wantrup in the United States, and Professor Innis, whose short paper written in 1938, I shall mention later in this

paper.1 It seems to me it follows from their work that the economist should contrast conservation policy with a policy of completely unrestrained use of resources in the manner that international trade theorists adopt when compar- ing a world of protective tariffs with the free-trade ideal. Conservationists- a word which I fear I must adopt-make certain assumptions which require particular attention because they differ from the assumptions made by the

*This paper was presented at the annual meeting of the Canadian Political Science Association in Winnipeg, June 3, 1954.

1A. C. Bunce, Economics of Soil Conservation (Ames, Iowa), 1945; S. v. Ciriacy-Want- rup, Resource Conservation (Berkeley, Calif., 1952), and many earlier articles; H. A. Innis, "The Economics of Conservation," Geographical Review, XXVIII, 187-9.

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Vol. XX, no. 4, Nov., 1954



Conservation Policy and Capital Theory

theorist concerning the decisions made by individuals about the use of resources.

Today's theorist, however, is probably less concerned about the interrelation- ship of the various sectors of production than were the classical economists. The writings of Ricardo, Mill, and Marx (which Mr. Baumol has recently dubbed the "magnificent dynamics") are full of allusions to capital theory, the rational allocating of resources over time. This sort of discussion has gone somewhat out of fashion, though Professor Leontief's work is highly relevant to any study of the competing needs for resources in the several processes in the economy. I believe, however, that just as the theory of comparative advantage provides a good starting-point for arguing about protection, the theory of capital provides the foundation for a discussion of conservation.

I

Wicksell, J. B. Clark, Fisher, Knight, and Hayek attempted to describe the allocation of resources over time. While other economists, for their own purposes, continued to write about (and to think in terms of) land, labour, capital, and enterprise, the specialists in capital theory practically discarded the dis- tinctions between the traditional types of scarce resource. Instead, they investi- gated the consequences of consuming or of investing currently available resources. Their prolonged controversies of the thirties concealed the common ground between them: that inputs invested today would produce a flow of services stretching indefinitely forward over time, but that it was always open to man to reduce the future flow by increasing current consumption, or to increase it by adding more and more to the social capital.

Man is regarded in capital theory as a rational planner who weighs up the relative advantages of putting scarce resources into production for current consumption or into processes for more remote use. Knowing the potentialities of all the productive techniques open to him, the owner can take action to make profits from expected shortages by having goods available when the need increases. He may produce these goods at the crucial time by devising substitutes for otherwise unavailable things, by hoarding, or by setting processes to work which will eventually yield the demanded product. All this applies equally to the owning of machines, of buildings, and of natural resources.

The amount which the planner decides to have available at a future time depends on his expectations of the market situation at that time, the market in the intervening period, the market in the succeeding period, and the rate of interest over the whole series of periods. By "market" I mean to suggest the combined effect of demand for his product, other sources of supply than his own, substitutes available then, and the cost situation. He will try to schedule his production from his natural resource so that the profit from the last unit of output from his resource in any period of time does not fall short of the profit (discounted at the going rate of interest) which that unit could earn in any other period. For if it could earn a higher profit in another period, he would be wise to curtail production now and to increase production then. He will have a property of the maximum present value when there is no possibility of

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506 The Canadian Journal of Economics and Political Science

switching units of output from period to period in order to earn a higher profit.2 If the owner of an asset could replace it (for some kinds of man-made and

natural wealth are irreplaceable) he would decide to do so if the total of the discounted profits he could earn from the replaced asset was sufficiently greater than the cost of borrowing the necessary funds to make the undertaking worth his while. If he already had his own funds (saved from wages, or perhaps from the liquidation of a standing forest or a coal mine) he would reinvest those earnings in natural resources only if the prospective profits were sufficiently attractive to make him prefer this investment over some other field of activity. Thus, whether a man decides to renew a natural resource depends upon whether or not there are better alternative uses for the funds he has earned in liquidating the original natural wealth.

This planning process by the individual works out in much the same way for the whole economy. Whether or not the natural resources are hoarded for future use depends upon business expectations and the going rate of interest. And whether or not renewable resources will be replaced depends upon ex-

pectations and the alternative available opportunities for investment, that is, again, upon the going rate of interest. The total amount of conservation in an

economy therefore depends upon the expectations of future prospects of the owners of resources, and the rate of interest which in the long run measures the expectations of investors in other fields relative to the funds available.

If resources in a region are being conserved, we would expect to find that the rate of interest is low and that investment opportunities elsewhere are

poor. But if they are not being conserved, either interest is high (showing a small flow of savings relative to the uses for it), or else investors find much better uses for savings than re-embodying them in natural resources. The im-

portant thing here is that natural resources are the capital of a region, just as man-made equipment is; and conservation is investment, just as augmenting the supply of machines is investment. When the social capital is managed by a group of rational entrepreneurs, the proceeds of liquidated assets (natural or produced) are, just like savings from all other sources, put to the use where

they will return the greatest yield.3

II

In the above paragraphs, I have attempted to say what I think the economist assumes about the management of social capital in that abstract world iwhere he has also assumed that the concept of the rational individual and of the maximizing firm is applicable.

Let us turn now to the conservationist. Because he is often a person working under the drive of emotion rather than of logic-and none the worse for that- it is difficult to distil from an accepted body of his writings precisely what conservation is. As I suggested at the outset, sometimes "conservation" is in fact merely an advocated policy about resource use which will benefit one class of users at the immediate expense of some other class. In such usage,

21 have discussed this concept at length in "Notes on User Cost," Economic Journal, LXIII, 1953.

3Though perhaps in another region. See below.




"conservation" is simply whatever everybody is for, just as sin is what every- one is against.

To avoid the need for detailed textual criticism, let me define the term in the following way, which would, I think, be acceptable, though perhaps in-

adequate, to many writers: Conservation is a public policy which seeks to increase future usable supplies of natural resources4 by present actions.

The present measurement and definition of future usable supplies is of course a complex theoretical undertaking. I do not intend to undertake this task here, but I suggest that it is not difficult intuitively to imagine alternative future situations in which there are various stocks and flows of natural resources available for use. The partial conservationist usually wishes to increase the future stock (or flow) of a particular resource; while the conservationist-

at-large wishes to see that the future has a larger stock of all natural resources. The "present action" necessary to secure this result may take many forms: education, storage, hoarding, construction, protection, replacement, segregation, and so forth, depending not only on the nature of the resource but also on its present scarcity and the form of its ownership. Nowadays writers play down the hoarding aspects of conservation to emphasize the investment, replacement, and protection aspects. This enables the conservationist to disavow the once-favoured intention of depriving the present generation of the use of a resource: he claims instead to wish to maintain a balance between the de- mands of the present and of the future, not to deprive the present of its use altogether.

But there is of course no distinction in economics between saving one resource for the future and investing another to protect the first. All resources, to a greater or lesser extent, are substitutes for one another. In the idealized

perfect market in a stationary state it would make no difference whether one extra dollar's worth of coal were saved for the future or one dollar were spent for extra pit props to save an abandoned mine from collapsing before future

generations could reopen it. A dollar's worth of resources is a dollar's worth of any resources, for the valuations of the market reflect all current needs and

expected future prices. Imperfections in the markets of the real world cloud the picture somewhat, but cannot conceal the analytical identity of the social costs5 of hoarding resources and protecting them (not to mention replacing them, as in forestry and fisheries). Hence funds invested in soil conservation and in the segregation of mineral reserves have the same economic result, and must be discussed in the same terms.

III

It is clear that if conservationists wish society to make less of what it now makes with its wealth, and devote more of its wealth to making natural resources available to the future, they must believe that if we leave the decision-

4That is, to increase the potential future rates of use above what they would be in the absence of conservation. Professor Ciriacy-Wantrup has provided a rigid definition in "Private Enterprise and Conservation," Journal of Farm Economics, XXIV, 1942, 75-96; and in Resource Conservation, 379-81.

5Costs borne by society or by third parties but not by the individual responsible for them.

507




making power about resources to the owners, we shall suffer. The conservationists believe that there are "wrong" decisions about resource use being made. For the sake of clarity in further discussion, I would like to distinguish three

ways in which such decisions might be said to be "wrong." The first is ignorant or wasteful decision; the second is an anti-social decision; and the last is a rational but short-sighted decision. Let me describe these briefly.

First, ignorant or wasteful decisions about resource use. These are decisions which lead to such depletion or exhaustion as to leave the final position of the resource owner worse than it need. be, given current techniques or markets. The owner (or farmer) is assumed to be failing to maximize his own profits, or, specifically, the present value of his enterprise. A great deal of resource

depletion is said to arise from this cause, particularly soil depletion. The farmer who does not know that certain crops destroy the fertility or structure of his soil is more an object of pity than blame. The landowner who fails to allow his acres to re-seed to thrifty growth is doing himself a disservice. The corporate water-user that dumps sewage above its own intake needs only to be advised of the error to change its ways. A great deal of so-called "conservation" is concerned with the prevention of this sort of irrational action. The experience of the T.V.A. with the Tennessee Valley farmers, and the changes of attitude of the great timber companies to their tracts, illustrates that education, taken in its widest sense, certainly results in the preservation of some resources. But this is not conservation in the sense in which I wish to discuss it. I wish to con- fine further discussion to the decisions about resource use by owners who know what they are doing.

Second, anti-social decisions about resource use. This category takes in a lot of ground. Certain kinds of resource use may be rational to the owner of the resource, yet inflict heavy costs upon his neighbours or fellow citizens. In other words, the social costs of his activities may exceed his private profits (assuming for the sake of argument that all gains and costs are measurable in

money terms). The owner of protection forests may cause greater havoc on the lands below his than his private gains from cutting the trees would warrant.6 The farmer who ploughs up the range may impose greater losses from blow-

ing dust than he himself experiences. Hydro-electric plants may destroy more in fisheries and scenery than they yield in power. "Conservationists" have

vigorously applied themselves to these joint-cost problems. In particular they have attempted to find methods which would permit simultaneously all uses of a given resource, rather than themselves assume the economic task of favour-

ing one use over another. From the analytical point of view, this sort of activity scarcely deserves the title of conservation. Important as it is, it is not primarily concerned with the future of a given resource, but with reconciling alternative

present uses. People who were completely indifferent to the welfare of the future could share with conservationists a desire to allocate current services of natural resource wealth. Multiple-use resources, as these are called, I wish to ignore here, and to direct attention to the third type of resource decision.

Third, the conservationist assertion that individual decisions are short-

sighted. The conservationist believes that the rational decision-in the Adam

6For a good example, see A. F. Coventry, "Soil and Water," in C. A. Ashley, ed., Re- construction in Canada (Toronto, 1943), 53-4.




Smith, profit-maximizing, individualist sense-is nevertheless not the optimum decision from a social point of view. This is what I would call "conservation

proper." The advocate of this type of policy would increase public outlays and

press laws which would cause perfectly informed, but not philanthropic, economic men, owners of single-use resources, to alter their planned rate of resource utilization in favour of future periods.

IV

In the space remaining I should like to analyse the arguments for this conservationist rejection of the private, rational decision about the best rate of use. I wish to explore the conservationist contention that even if we leave aside the problems of multiple-use resources, and of uninformed users, there is still a case to be made for imposing a cost on the present so as to increase the avail-

ability of certain-or all-resources in the future. First, let us examine what Professor Innis called the "nationalist" implica-

tions of the conservationist argument. The conservationist movement has refused to recognize the benefits of in-

ternational trade as an argument against itself. Indeed, American economists have stated that Friedrich List and Karl Knies both anticipated the conservation doctrine in their works advocating national tariff protection.7 Viewing the economy as a self-sufficient region implies that each local source of raw materials must be maintained in the interests of national strength. National deficiencies are seen to be as serious in peace as they would be in war. Indeed, the case for conservation often reads very like a plan for a nation preparing for a siege. College textbooks on conservation consistently play down the possibility of importing materials to augment dwindling home output: the "nation" is written about as though it were the whole world. For example, a much-

reproduced cartoon in 1945 depicted American ex-soldiers unable to buy new homes because in the absence of conservation American forests had all been

destroyed: as usual, the possibility that timber might be imported as an alternative to forest conservation was ignored.

The corollary to this isolationism is, paradoxically enough, a desire to import raw materials to prevent further depletion of the home resources. Many Amer- icans, for example, today advocate importing petroleum to conserve United States stocks. Thus we observe some conservationists urging policies which are

necessary only if imports are unobtainable; and others urging imports to conserve home resources. At one time Canadians argued that a reduction in the American timber tariff was a Yankee device to secure the conservation of the American forests at the expense of Canada; and today Canadians often argue that the export of timber to the United States is a greater offence against conservation than manufacturing lumber products in Canada from that same timber.

While it should never be denied that there are occasions when conservation is the most rational policy for a society, it is observable that the advocates of the policy are very often persons who consistently take the national or regional view of resource use, and who, sometimes rightly from the regional point of

7See R. T. Ely, ed., The Foundations of National Prosperity (New York, 1917), 13, 73, 113.

509




view, ignore the possibilities of increased trade and production8 and of entre- preneurial adaptation to threatened shortages.

This brings me to my next point. Such nationalistic views about resource

policy are often accompanied by conservatism, a pessimistic view of progress. In this connection, it should be pointed out how important to the creed of the conservationist is the assumption that technology-the knowledge of the arts of production-does not change. Both scientists and laymen make this crucial assumption.

The conservationist with a scientific background is convinced that certain

physical materials derived from natural resources are irreplaceable and unique. The mineral fuels, for example, are repeatedly cited as indispensable to society, yet wasted and vanishing. I cannot of course discuss the truth of this assertion of indispensability in an engineering context, but I must emphasize that in such arguments the engineer nearly always forgets the powers of the entre-

preneur. If the all-wise engineer can foresee a shortage, so too can the Schum-

peterian entrepreneur-and profit from it. Like Egypt anticipating the seven lean years, the business man can innovate, hoard, adapt, replace, and renew. The disappearance of any particular resource may be discounted and its need

supplied by one or many partial substitutes. The engineer, however, can in his own experience see the power of the

economy to invent its way out of some shortages, but the layman is harder to convince. Canadian governments and their leaders have consistently refused to see the point of Innis' argument: "The drive of modern technology with the modern pecuniary economy involves exhaustion of natural resources and getting on to something else. Depletion of pulpwood enables hydro-electric power to be turned from paper plants to other industries in the interests of 'progress' and 'higher standards of living'. The problems of conservation are concerned with restricting technology as well as with improving it and utilising it to

capacity."9 The "getting on to something else" that Professor Innis mentioned

frequently involves abandoning an industry or a location and moving capital and labour to a more advantageous region. Naturally, the depleted region, in

danger of depopulation, will take all the steps it can to prevent this loss; and conservation of natural resources, which is here comparable to protection of a non-economic industry, is the obvious policy. Regional interests favour re- forestation and fisheries protection even when comparative advantage and

profitability indicate that the real national income would benefit more from other uses of reinvested funds.

Finally we come to the conservationist theory that the private owner of

8The regional argument for conservation is a complex one. Briefly, the argument for reinvestment of liquidated funds can be stated thus: If the region is part of a larger nation, so that emigration follows resource depletion, the gain to the larger economy from the re-allocation of production in the most prolific locations and in the most profitable industries must be balanced against the social cost borne by the stranded inhabitants of the deserted region. See B. S. Keirstead, The Theory of Economic Change (Toronto, 1948), chap. xII. Even if migration is impossible, the mobility of investible funds abroad con- stitutes a threat to the local standard of living. The case for conservation also requires further evidence to show that investment of funds in natural resources provides a better regional source of livelihood than investment in other types of project (see below). I hope to discuss these points in a later publication.

9"The Economics of Conservation," 139.



Conservation Policy and Capital Theory natural resources has myopia-short-sightedness; that he cannot see into the future sufficiently to perceive the magnitude of future needs. The theory is that he has contracted myopia from contact with the market for loanable funds, where the rate of interest is alleged to be a symptom of endemic faulty vision. Put more precisely, the conservationist (in this respect following Pigou, Ramsey, and other theorists) alleges that whereas a future cost of a given magnitude will be as serious as a similar cost today, the market discounts this future cost and measures it as less important than a present cost. Hence the

entrepreneur takes action to alleviate the present, rather than the future, cost; or, if it is a matter of alternatives, he prefers a future cost to a present one of the same size. For instance, a farmer who must borrow money from the market will prefer losing, through soil erosion, productive power equal to a hundred dollars ten years hence to paying a hundred dollars now to prevent it. And the farther in the future the anticipated loss, the more unwilling is the farmer to incur a cost to prevent it. Hence, at most rates of interest, no private owner will incur any costs to safeguard our descendants a century from now.

There are of course several widely understood reasons for this "myopia." One is that the uncertainty surrounding needs for, and supplies of, resources in the future is so great that no one wishes to invest in the outcome of a project one hundred years from now. Another is that owners in certain natural resource industries, whose future gains would be high if they could invest for remote future periods, find that they cannot borrow money at the "going" rate of interest in order to finance the necessary project. Instead they must borrow

through the channels of an imperfect loan market, at higher rates, and are con- sequently able to invest only in prospects which offer a safer and quicker return. Advocates of conservation realize the importance of the element of risk and of the unsatisfactory nature of some capital markets, and have taken steps to lessen these difficulties as much as possible, so that owners who would invest in long-term conservation projects if they could get the funds may now find sources for doing so.

V

But in addition to deploring the difficulties of uncertainty-a subject in itself-and the shortage of investible funds, the conservationist objects to the "irrational"' time preference of the market. The minimum rate of discount on the future is still alleged to be too large.

It seems to me that there are only two grounds for rejecting the market rate of discount in favour of some lower rate prescribed by a public authority. One is that the market is improperly informed on needs, profitability, or productivity. This is a view sometimes put forward by the Left, and it has been well stated by Dobb. As an a priori argument for a lower rate of discount on con-

servationiprojects in particular it falls to the ground, and does not require here the discussion' it would deserve in another context. The other view, which comes very close to the first, is that the market rate of discount is too much affected-by the shortness of human life. While it is true that the existence of a good market enables the saver to sell his assets without actually liquidating them at a certain time, nevertheless at a given age the typical citizen stops saving and begins to draw down his accumulated wealth in anticipation of his

511




own death. If human life were longer (and if earning-life were proportionately longer) then savings would be higher and-ceteris paribus!-the discount on the future would be less. If man lived to be one thousand, the discount would be less than when his span is three score and ten. The conservationist concept is that although man does not live so long, "society" does. The frequent invo- cation of "unborn generations," "the future," "our descendants," and so forth in the literature supports this theory. Hence, it is argued, while it is to be expected that man, being short-lived, would in his markets cast up a rate of discount that reflects his own life-span; society, in planning for "its" own future, should ignore this and use a social rate of discount.

Such a rate as Ramsey describes in his plotting society's journey to "Bliss" (ignoring lifetimes and thinking only of social welfare) would fill the need for a "social" rate. Perhaps Edmund Burke had the same point of view in mind when he wrote:

Society is indeed a contract. Subordinate contracts for objects of mere occasional interest may be dissolved at pleasure; but the state ought not to be considered as nothing better than a partnership agreement in a trade of pepper and coffee, calico or tobacco, or some other such low concern, to be taken up for a little temporary interest, and to be dissolved by the fancy of the parties. It is to be looked on with other reverence; because it is not a partnership in things subservient only to the gross animal existence of a temporary and perishable nature.... As the ends of such a partnership cannot be obtained in many generations, it becomes a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born....

I cannot conceive how any man can have brought himself to that pitch of pre- sumption, to consider his country as nothing but carte blanche, upon which he may scribble whatever he pleases. A man full of warm, speculative benevolence may wish his society otherwise constituted than he finds it; but a good patriot, and a true politician, always considers how he shall make the most of the existing materials of his country. A disposition to preserve, and an ability to improve, taken together, would be my standard of a statesman.10

This is an idealistic view of the state which I find unattractive, but which cannot usefully be criticized here. It will be observed that Burke's view, and that of the conservationist, cannot avoid identifying society with country and nation; cannot avoid, indeed, the whole nationalistic attitude touched on earlier. Indeed, the three foundations of conservationist thought, nationalism, conservatism, and long-sightedness are both analytically and, I think, psycho- logically connected with one another.

VI The practical implications of such long-sightedness, that is, of making in-

creased provision for the future, are also important. Let us ask the conse-

quences of the state's reducing the rate of interest so that investors might put more aside for tomorrow. First it should be noted that not all projects which

require a low rate of interest in order to be profitable are necessarily long- range projects. Hence there would be a great increase in investment in all

types of projects, some temporary and flimsy, some durable and forward-

looking. Carnivals and colosseums both benefit from cheap money. The advocate of increased provision for the future, if he chooses to reduce the rate of

lOReflections on the Revolution in France, Everyman ed. (London, 1910), 98.




interest in this cause, will find that many new investment projects do not benefit the future very much. (This is the capital-theory point that an increase in

capital may mean an increase in the "duration of investment" of labour and other services without necessarily providing an increase in durability of the

things they are invested in.) To overcome this difficulty he might decide to discriminate and reduce the operative rate of interest only for natural resource investments. Here again he would probably be frustrated. Seepage of funds into the money market for non-natural resource uses would almost certainly occur, and in time a special rate of interest for natural resources would become a general rate of interest for a large part of the economy. Thus there would

probably result, in any case, increased profits for those entrepreneurs who would have invested even at the old rates of interest, increased investment in all lines of productive activity, increased renewal and replacement of natural resources, and a constant aggregate demand for natural products by the capital goods and consumption goods industries."

And there are more serious implications. The increase in investment in all types of projects requires the diversion of labour and other productive services from consumption goods industries to capital goods and the extractive industries. Unless there is something-like rationing or price control or both-' to prevent consumers from exerting their demand, there is likely to be in- flation of prices in the consumer markets, an increase of profitability there, and a diversion of enterprise from investment for the future and conservation to producing consumer goods. In other words, increased investment and conservation must imply a reduction in consumption. Just as conservation has a money cost, so it has a real cost for the whole of society. Putting more aside for the future'means less enjoyment today.

VII

Clearly conservationists do not wish society to reduce consumption in this

way. Then what do they want? Perhaps cheaper credit for selected conservation enterprises alone; this would draw resources away from other industries and increase the use of labour and other services for conservation

purposes. This would in fact be a type of subsidy for conservation, and not

really an increase in provision for the future in the over-all sense that Burke's and Pigou's philosophy would suggest.

Good conservation policy would seem then to mean that society should

provide for the education of the owners and users of its natural resources; and should make sure that there is adequate provision for the allocation, among multiple uses, of some types of natural resource. But I do not think that society should lightly agree to the basic philosophical proposition which must underlie the desire to preserve resources as they would be in the absence of their human users.

"lDepending upon whether or not the increase in investment at the expense of consumption necessitates a greater or smaller use of natural products. There is a priori no reason to expect any particular change over all, though certain resources may be greatly affected. Full employment is of course assumed. If there was underemployment of labour, the reduction in the rate of interest would probably eventually lead to an increased demand for natural products. A completely unemployed economy fulfils most conditions for a conservationist state. See below.

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Conservation Policy and Capital Theory