This paper proposes an extension of the classical theory of normal prices to an n-commodity economy with exhaustible natural resources. The central idea is developed by two analytical steps. Firstly, it is assumed that a given flow of an exhaustible resource in short supply is combined with the coexistence of two methods of production using that resource. Sraffa’s equations are reinterpreted by adopting the concept of effectual supply of natural resources and avoiding the assumption of perfect foresight. Secondly, in force of the Hotelling rule, some limitations are imposed to the dynamics of normal prices and, by implication, to technical and structural change. A comparison, between such approach and the notion of intertemporal equilibrium with natural resources, introduces the central argument. The final part of the paper presents a critical assessment of recent works in this area. The conclusions are focused on methodological issues.
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Paper provided by Sapienza University of Rome, Department of Public Economics in its series Working Papers with number
57.
Find related papers by JEL classification: B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith) Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
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