This paper reports the results of an evaluation of partial-equilibrium welfare measures of the effects of large multisector shocks to an economic system. A nine a developed economy was used in the analysis. The findings indicate that the errors in single-sector, partial-equilibrium welfare measures depend on the consistency in the signs and approximate magnitude of indirect price effects. Disparities in either the direction or size of price changes in the indirectly affected markets can lead to large errors in the partial-equilibrium welfare measures.

Skeptical that research to date does not warrant confidence in the relationship between natural resources and the maintenance of material well-being, the authors consider the conventional explanations for how resource stringencies have been avoided and what has been learned during the past decade. They then point out what has been missed by formal economic modeling and why it may be important in understanding the implications of resource scarcity. 19 references.