Sittidaj Pongkijvorasin (Department of Economics, University of Hawaii at Manoa; Chulalongkorn University, Bangkok, Thailand) James Roumasset () (Department of Economics, University of Hawaii at Manoa)
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The terms “royalty”, “marginal user cost”, and “scarcity rent” are often used interchangeably in resource economics, resulting in considerable confusion. We suggest distinct and meaningful definitions for the terms “royalty”, “marginal user cost”, and “scarcity rent” and discuss the relationships among them. Using the example of extraction fees for leasees, we show how failing to understand the distinct meaning of these terms may lead to policy errors. By constructing a model containing both capital and resources as state variables, we verify that user cost in capital theory is a different concept than marginal user cost in resource economics and suggest a taxonomy to avoid misinterpretation.
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number
200712.
Find related papers by JEL classification: Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity A10 - General Economics and Teaching - - General Economics - - - General
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