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Voracious Transformation Of A Common Natural Resource Into Productive Capital

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  • Frederick van der Ploeg

Abstract

I analyze a power struggle where competing factions have "private" financial assets and deplete a "common" stock of natural resources with no private property rights. I obtain a feedback Nash equilibrium to the dynamic common-pool problem and obtain political variants of the Hotelling depletion rule and the Hartwick saving rule. Resource prices and depletion occur too fast, so substitution away from resources to capital occurs too fast and the saving rate is too high. The power struggle boosts output, but depresses sustainable consumption. Genuine saving is nevertheless zero in a fractionalized society. World Bank estimates may be too optimistic. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Frederick van der Ploeg, 2010. "Voracious Transformation Of A Common Natural Resource Into Productive Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(2), pages 365-381, May.
    • Handle: RePEc:ier:iecrev:v:51:y:2010:i:2:p:365-381
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    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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