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Christopher Nesseth

nesseth.christopher@bls.gov

Christopher Nesseth is an economist in the Office 

of Employment and Unemployment Statistics, 

U.S. Bureau of Labor Statistics.

Easing the tension: economic growth and our 

dwindling natural resources

Economic Growth and the Environment: An Introduction to 

the Theory. By Clas Eriksson. Oxford, U.K.: Oxford 

University Press, 2013, 264 pp., $75.00 hardcover, $35.00 

paperback.

Promoting economic growth while mitigating negative 

environmental externalities is often seen as a zero-sum 

game. Much ink has been spilled praising the merits of one 

course of action while downplaying the impact or 

importance of the other. As is so often the case, the truth 

probably lies somewhere in the middle—a piece of ground 

on which Clas Eriksson’s Economic Growth and the 

Environment firmly plants itself.

The book offers a well-rounded introduction to the study of 

growth constrained by pollution and resource scarcity. 

Although written at the advanced undergraduate level, the 

text is sufficiently clear and concise to allow nontechnical 

readers with a firm grasp of calculus to follow the formulae 

and concepts introduced. That said, there is still much here 

for those who have studied advanced economics, as I 

certainly found the material in the second half of the book 

enlightening.

Split into three parts, the book examines the central 

question of whether environmentally sustainable economic 

growth is feasible. Each successive part builds on the 

concepts introduced in the preceding one, aiming to 

construct models that describe economic growth with 

increasingly complex interactions among different factors of 

production. Part I provides the basic tools necessary for this 

type of analysis, whereas parts II and III add the 

complicating factors of, respectively, natural resource 

scarcity and pollution. This layout resembles that of a 

textbook. Readers hazy on the technical details of their undergraduate economics courses can get up to speed 

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quickly, while those taking such courses concurrently with reading the book can appreciate the nuance introduced 

by various model applications.

Part I introduces the tools of economic growth theory, and its chapters serve equally well as a primer and a 

refresher. The text relies mainly on the Solow growth model, which is introduced alongside Cobb-Douglas and 

constant-elasticity-of-substitution functions. Model inputs are defined, and the strengths and weaknesses of each 

model are discussed. Chapter 4 introduces technological change and its implications for the models. The author 

draws a distinction between endogenous and directed technological change. This distinction is important because 

of the growing attention paid to pollution’s negative impact on the environment and the correspondingly increasing 

directed effort to mitigate that impact through research and technological innovation.

Several simplifying assumptions are held throughout, such as that postulating constant returns to scale—the 

notion that multiplying inputs yields a corresponding multiplication of output. Eriksson explains these assumptions 

and their justification in the introduction. None are particularly unique, and, given the target audience, it is unlikely 

that readers versed in the economics literature would take issue with any of them. A deeper dive that makes fewer 

assumptions would have made the text ill-suited to teaching a course at the advanced undergraduate level.

Modeling the impact of limited natural resources on economic growth is the crux of part II. Chapter 5 folds land as 

a production factor into the model, while chapter 6 incorporates exhaustible resources. Chapter 6 is the longest in 

the book and, given that it tackles the most complex inputs, justifiably so. The author introduces the energy 

constraint to the model, examining the implications of both renewable and nonrenewable resources. A short, 

interesting section on the resource curse, or “Dutch disease,” is also offered. The moral of Eriksson’s story is that 

robust institutional checks on corruption are particularly important in mitigating the growth-suppressing effects of 

the curse.

The part of the book I suspect many will find most compelling is the last. The final three chapters are devoted to 

reconciling the competing goals of, on the one hand, encouraging growth and, on the other, limiting pollution as a 

negative environmental externality. The tension between these two goals is what came to my mind when I first 

read the book’s title, and Eriksson devotes enough space to shed light on the topic. I was especially pleased with 

the final chapter, which focuses on utility maximization. Rather than treating pollution as an absolute negative, the 

author carefully examines its relationship with consumption. He concludes that pollution is a price that must be 

paid at some level of economic growth, and the question is how society optimizes on that constraint.

As already noted, the text builds upon itself from page to page and from chapter to chapter, making learning about 

the interplay between economic growth and environmental sustainability straightforward and relatively simple. 

While this technique is by no means novel, I found it well implemented and worth highlighting. Although I was a 

little hazy on my undergraduate economics courses when I picked up the book, I never felt lost or overwhelmed by 

the concepts presented. I highly recommend this text as a valuable resource for readers interested in expanding 

their knowledge in this corner of the economics discipline.

Just as useful to the student reader are the references to further readings at the end of each chapter. These 

references could be particularly helpful to those less familiar with the development of economic growth theory, and, 

in the early chapters of the book, Eriksson points to some stepping-stone papers in the field. He offers not just a 
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list of references, but also a few words about the merits of each source. For those more interested in a list, a 

bibliography is, of course, provided.

One additional feature that would have helped me advance through the more technical parts of the text is an 

appendix with a quick reference guide. Such a resource could have included definitions of economic terms and 

variables, allowing readers to flip to it and refresh their memory. However, a firm understanding of these terms and 

variables is not too much to expect from the target audience, and I cannot critique the lack of a reference guide too 

strongly.

Eriksson consistently proves knowledgeable of the material he covers. Perhaps more importantly, he is adept at 

conveying it without excessive reliance on jargon. I came away with a much better understanding of the tensions 

between advancing economic growth and minimizing negative environmental externalities. It could very well be 

that one of these objectives is more important than the other and that the middle ground is overrated. Regardless, 

with the tools learned in this book, I will be better prepared to make an informed judgment the next time someone 

stakes a claim.