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Comparing the Optimal Depletion Time for a Non-renewable Resource Under Malthusian Flow Scarcity Conditions and Malthusian Stock Scarcity Conditions

  • Philip Lawn
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    In conventional terms, the optimal price, extraction quantity, and depletion time of a non-renewable resource is based on the Hotelling (1931) Rule-also referred as Malthusian Flow Scarcity conditions. Since any measure of resource scarcity should account for the need to sustain income-generating capital, an additional "user cost" overlooked under Malthusian Flow Scarcity conditions ought to be incorporated into the price of a non-renewable resource. The incorporation of the user cost not only leads to the eventual establishment of a replacement capital asset, but also slows the rate of non-renewable resource depletion. Hence, compared to Malthusian Flow Scarcity conditions, non-renewable resource depletion under so-called Malthusian Stock Scarcity conditions prolongs the life of the resource.

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    Article provided by IUP Publications in its journal The IUP Journal of Agricultural Economics.

    Volume (Year): II (2005)
    Issue (Month): 1 (January)
    Pages: 62-70

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    Handle: RePEc:icf:icfjag:v:02:y:2005:i:1:p:62-70
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