The Hidden Side of Academic Economics
Mohammad Kawrani, 2026.08.11
We are always told that economics is the science of managing limited resources to satisfy unlimited needs, or the science that studies human behavior in the way people use scarce and limited resources to satisfy unlimited needs and desires. We are also told that economics focuses on the production, distribution, and consumption of goods and services, seeking better management and the optimal use of available resources.
But if we look at the management of natural resources from a perspective broader than traditional economics, we discover a side that is not usually taught to young people in universities: a set of questions lying at the intersection of economics, politics, law, ethics, and geology that economics alone does not fully explain. For this reason, they do not always appear in basic economic models.
The most important questions in this hidden area are:
Who owns the natural resource? Who determines the rate at which it is extracted? Who receives its revenues? And who bears the cost of its depletion?
1. A Natural Resource Is Not “Economic Production” in the Usual Sense
Economics focuses heavily on production, distribution, and consumption. Yet oil, gas, groundwater, minerals, and forests were not created by human beings in the first place.
Look at the crisis surrounding the Strait of Hormuz today and how it has become a global crisis because of a decision made by the leader of a country located thousands of kilometers away from the strait.
Here a fundamental question emerges:
Should the extraction of a natural resource be considered the creation of new wealth, or merely the conversion of a portion of stored natural wealth into money?
This is an extremely important distinction.
When a state extracts one billion dollars’ worth of petroleum, its GDP and income may rise. But part of that increase is not “production” in the ordinary sense. It is the conversion of a non-renewable natural asset into a financial asset.
Therefore, looking at GDP alone can provide a misleading picture of a country’s actual wealth.
2. “Resource Rent” Is the Most Important Part
Particularly in oil, gas, and minerals, there is the concept of economic rent: the return exceeding what is necessary to compensate for the costs of extracting the resource and providing the normal return to capital and labor.
The deeper political question is:
Who receives this rent and profit?
The state?
The corporation?
Foreign investors?
The people living above the resource?
Future generations?
Here the issue moves beyond economics into theories of ownership and justice.
3. The Hidden Problem: Turning Natural Wealth into Political Power
A natural resource does not merely generate money; it can generate power.
A state controlling oil or gas can use its revenues for:
Public expenditure → military → infrastructure → subsidies → external influence → consolidation of the political system.
This is why natural-resource economics is closely connected to the concept of the rentier state.
More dangerously, the state may become increasingly dependent on the resource and less dependent on its citizens and their taxes.
This creates a fundamentally different relationship:
In a tax-based state, citizens finance the state and therefore demand accountability from it.
In a rentier state, natural resources may finance the state, weakening the fiscal and political relationship between citizens and government.
This is one of the most important ideas deserving further study.
We can add another question: does a country such as Lebanon have the right to acquire nuclear fusion technology and use it in its economy, particularly in the energy sector?
More broadly, private companies working in industries such as iron processing and construction materials in Lebanon — such as Al-Moussawi Company for Building Materials — may raise the question of why they should not have access, where legally and safely feasible, to advanced nuclear technologies that could transform industrial production.
And here we encounter a question that the market alone cannot answer:
We have not even fully benefited from the nanotechnology equipment that has reached us; how can we expect to use more complex technologies to improve our economic situation?
4. The Temporal Problem: What Do We Do With Wealth That Does Not Renew?
If a country possesses oil reserves worth one trillion dollars, it does not simply possess “one trillion dollars.”
Rather, it possesses a choice:
Extract the wealth today, or leave it underground and extract it later.
Here opportunity cost, time, and the discount rate enter the equation.
If the state extracts oil rapidly, it receives money today, but it sacrifices a natural asset that could generate income in the future.
5. Future Generations Are Absent From the Market
This may be one of the deepest problems.
The present market consists of:
Current sellers + current buyers.
But it does not include the people who will be born 50 or 100 years from now.
If our generation extracts most of the oil, gas, and minerals, future generations cannot enter today’s market and say:
“Leave us our share.”
This is why the concepts of intergenerational justice and sustainable national wealth emerged.
At this point, traditional economics requires philosophy and ethics.
6. Common Resources: Who Owns Water, Air, and the Sea?
There are resources that cannot easily be transformed into individual property:
Groundwater
Rivers
Seas
Forests
Air
Fisheries
Certain mineral resources located in public areas
Here we encounter the problem of the commons.
If every individual can exploit a resource without coordination, individually rational behavior can produce a disastrous outcome for everyone.
This is the idea famously known as the tragedy of the commons, although subsequent research has demonstrated that communities can sometimes build successful local institutions for managing common resources rather than relying exclusively on privatization or state control.
7. What the Market Price Does Not Show: Depletion and Environmental Damage
If an oil company extracts oil and sells it, the market price may reflect the costs of drilling, transportation, and refining. But it may not fully reflect:
Water pollution
Environmental destruction
Carbon emissions
Pollution-related diseases
Loss of biodiversity
The future cost of environmental restoration
In other words, the private price may be lower than the true social cost.
This is where the theory of externalities becomes relevant.
8. Deeper Still: The “Economics of Wealth Management,” Not Merely the “Economics of Extraction”
Perhaps this is the idea we are really looking for.
There is an enormous difference between:
the economics of resource extraction
and
the economics of managing the wealth generated by resources.
A country may be extremely rich in natural resources yet economically poor if it follows this cycle:
Extract oil → sell it → spend the revenues → return to where it started.
A more intelligent state does this:
Natural resource → rent → sovereign fund/investment → human capital + infrastructure + technology + industries → diversified economy → sustainable wealth.
Here natural wealth is transformed from a depletable stock into capital capable of generating further wealth.
9. Therefore, the Real Question Is Not “How Much Oil Do We Have?”
The real question is:
What do we do with the barrel we possess?
This leads to a deeper chain of questions:
Who owns the resource?
↓
Who extracts it?
↓
Who receives the rent?
↓
How are the revenues distributed?
↓
How much do we consume and how much do we invest?
↓
What do we leave for future generations?
↓
Does the resource become the foundation of a productive economy, or merely a rentier economy?
In my view, this chain provides an excellent starting point for what could be called:
“The Economics of Natural Wealth Management.”
This field would be broader than merely the economics of oil or natural resources. It could develop into a comprehensive theory connecting:
Economics + Management + Politics + Law + Ethics + Environment + Intergenerational Justice.
This also intersects strongly with the project of Islamic Human Sciences, if we seek to develop an Islamic conception of natural-resource management in which resources are regarded as a public trust and a form of wealth belonging to the community and future generations, rather than merely commodities to be traded in the market.
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