Natural resource economics under the rule of Hotelling

Authors


  • Presidential address delivered at the 41st Annual Meeting of the Canadian Economics Association, Halifax, 2 June 2007. I would like to thank Didier Tatoutchoup for his assistance in collecting the data and Isabelle Boudreau for bibliographic assistance. Very special thanks also to my friends and long-time collaborators Pierre Lasserre, Ngo Van Long, Michel Moreaux, and Stephen Salant for their comments and especially for the many enjoyable and profitable discussions about natural resource economics we have had over the years. Email: gerard.gaudet@umontreal.ca

Abstract

Abstract.  Natural resource stocks held in situ are physical assets. Equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere. I discuss a number of factors relating to the evolution of extraction costs, to the durability of the resource, to market structure, and to uncertainty, that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks. The emphasis is put on how those factors can potentially help bridge the gap between the basic Hotelling's rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources. I also highlight some theoretical and empirical issues that need further attention.

Abstract

Les stocks de ressources naturelles sont des actifs dont le taux de rendement doit, à l'équilibre, étre égal à ce que leur propriétaire pourrait obtenir comme rendement en les plaçant ailleurs. Je discute de facteurs, reliés à l'évolution des coûts d'extraction, à la durabilité de la ressource, à la structure des marchés et à l'incertitude, qui sont importants pour caractériser correctement le taux de rendement sur la détention de stocks de ressources naturelles. L'accent est mis sur la capacité de ces facteurs à réconcilier la régle d'Hotelling élémentaire avec le comportement historique des prix des ressources naturelles tel qu'observé sur les marchés des flux de ressources. J'attire également l'attention sur des questions théoriques et empiriques qui mériteraient qu'on s'y attarde.

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