Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

Revisiting exhaustible resource economics: The Hotelling rule and prices of production

Erreygers Guido, University of Antwerp

In 1931 Harold Hotelling argued that in a competitive environment the royalty of exhaustible natural resources tends to increase at a rate equal to the rate of interest. This result was of central importance to the literature on the economics of the exhaustible resources which developed in the 1970s, with contributions by Partha Dasgupta, Geoffrey Heal, Robert Solow, Joseph Stiglitz and many others. In this paper I reconsider the implications of the Hotelling rule using a multisector Sraffian approach. Although there have been several attempts to integrate exhaustible resources in Sraffa’s long-term framework (e.g. by Heinz Kurz and Neri Salvadori, Bertram Schefold, and Sergio Parrinello), I derive some new results which generalize the results obtained on the basis of the extremely simple corn-guano model proposed by Christian Bidard and myself. In the paper I derive the long-term equilibrium path of values, and discuss how both the prices of the produced goods and the wage of labour are affected.

Area: Eshet Conference

Keywords: Hotelling; Sraffa; exhaustible resources

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