1. Some Research Issues in the Science, Technology and Economics of Mining

2. Effective management from a societal perspective
Involves good practice from business management, economic policy, science and technology
Best practice in one area usually depends on what is happening in the other areas
This is certainly true of S&T.

3. Why the wide range of outcomes in mining?
Potential contribution is often great, as where it launches growth acceleration, and over say 15 years leaves country 60% richer than it would otherwise have been without that acceleration
Often falls far short of potential, leading to the idea of “Natural Resource Curse”, as where petroleum in Nigeria often credited with making the general population worse off
So best for a country to know what it is doing

4. The Potential
Static ``resource allocation`` gains by achieving best use of resources
Positive linkage effects, especially if there are underutilized resources
Can lead to economy’s acceleration from slow or modest growth to sustained high growth (“take-off”)

5. But… The “Natural Resource Curse”
Whereby natural resource dependency may actually lower growth on average
Debatable in extreme form, but
Incontestable that there are lots of relative failures and that average long run growth performance is weaker than might be expected
Since there are also successes, there is a very wide range of growth outcomes in mineral dependent countries
Are things getting better over time?

6. Factors in the “Growth” Curse
Corruption (theft, etc.) and associated weak governance
Weak economic management for other reasons (a) lack of expertise on the mechanisms of the curse
(b) short time horizon, lack of policy continuity
(c) inflexible economy
The political appears to be more important than the economic

7. The “Inequality” Curse
Corruption and theft tends to be income/wealth concentrating
Mining is capital intensive, so creates few jobs, shrinks other tradables sectors (mainly manufacturing and agriculture) and pushes down on the equilibrium wage for many types of labour
Some linked industries are also capital intensive
Empirical evidence consistent with this expectation
Can greatly swell the informal sector—Venezuela after late 1980s

8. The “Environmental” and “Human Rights” Curses
High profit industries create great incentives to break rules and often attract people willing to do it or to turn a blind eye
Setting often environmentally fragile and in areas populated by politically weak groups
Implies need for strong regulations, firmly applied

9. How to get near the Success end of the Spectrum of Possibilities
Good economic management—general principles fairly clear but details not, for lack of empirical research to date and because every country differs
Good S&T policy, again many general principles clear but details not, e.g. where payoffs are biggest, how to interface with business, who should do the research, etc.
Good integration of the two and of environmentalists likley to be quite important

10. Economic Research Priorities-1
Country-based attempts to understand the growth impacts of minerals exports, why sometimes so much higher than other times, e.g. Brazil, Chile, Mexico, Colombia, Peru Ecuador, all of which have confronted potential or actual NRC problems
Studies of how comparative advantage shifts are achieved when the mining sector shrinks in relative or absolute terms, e.g. role of devaluations, directed S&T efforts, flexible labour and capital markets
Possible crash-softening effects of a strong manufacturing sector?

11. Foreign Direct Investment and Growth
Overall evidence that on average FDI contributes to host country growth is weak, if present at all
Probably it does when directed to some sectors but does not when going to others? Is mining one of the “others”?
But trends may be improving over time? If so, why?

12. Economic Research Priorities-2
Case study and other approaches to better understanding the apparent mining-inequality link
How much is political, broadly defined (to include degree of corruption, etc.) and how much is economic/technological
Role and character of the informal sector

13. Science, Technology, and the Contribution of Mining
Technology within the sector
Technology in linked sectors, especially manufacturing and agriculture
Potential for appropriate technology in any of these?
Scope of action at the national level

14. Who Should do and Who Should Finance the S&T Research and the Economic Research
Private sector’s role
Public sector, research and funding, especially of independent institutions
Independent arms-length institutions (think tanks, academic)

15. The Regulatory Apparatus
Especially important in mining, given its nature—extractive, environmentally dangerous, non-competitive or chaotically competitive
Important to study best practice in the success stories

16. Preparing the “Mining-Related Technocracy”
The range of economic and technological issues that some or all of those involved should understand, e.g. the Natural Resource Curse
Avoids private time wasted debating non-issues and may raise level of public discourse

17. Some Lessons from Canada
Lots of experience does not eradicate major scandals
A promising first phase of an Oil Heritage Fund can go down the drain as later governments take a different course
A generally open society does not end research distortion in the public sector and muzzling of scientists, especially on the environmental front
Short-run interests tend to outweigh longer run ones
Lack of policy continuity across governments