Classical Economics and the Problem of Exhaustible Resources
Abstract:In this paper we discuss in terms of the simple model of exhaustible resources proposed by Bidard and Erreygers some of their propositions. The concept of ‘real rate of profit’ introduced by them is shown to be of no analytical use. It is stressed that the mathematical properties of the economic system under consideration are independent of the numeraire adopted. The classical treatment of exhaustible resources in terms of differential rent is shown to be correct under well-defined conditions. It is argued that it is complementary to, rather than incompatible with, the approach which emphasizes that in conditions of free competition the rate of profit obtained by conserving the resource equals that in production processes.
Document Type: Original Article
Publication date: August 1, 2001