Some economic aspects of the conversion of raw materials into final products

In a previous paper Pick and Becker1 analysed the direct and indirect relations between energy and the [`]physical structure' materials used by the engineering and construction industries. The present paper provides a more general description of materials conversion from natural resources to final products. The cost of raw materials, only some 30 per cent of which come from the developing countries, accounts for a relatively small proportion of final product costs, the remaining product costs arising from the progressive application of labour, capital, energy, etc. Emphasis is placed on the complete interdependence of the inputs to manufacturing; a change in any one having implications for the remainder. Materials substitution, while in principle providing an adaptive mechanism to change, also has implications for a wide range of factors of production and for social and industrial issues such as regional employment, the demand for specific trades and professions, for research and development and for industrial structure and capital investment. Full allowance for this interdependence needs to be an integral part of effective long term policy formulation and of research and development planning.