Exhaustible Resources and Classical Theory

Smith, Ricardo, Marx and Sraffa made no theoretical distinction between exhaustible resources and lands. The very notion of exhaustibility, however, can be opposed to that of `indestructible powers of the soil' (Ricardo) and calls for a specific analysis distinct from that of rent. The diversity of the contemporary attempts to deal with that question in a classical framework shows how varied are the understandings of the main methodological features of classical theory. Three crucial points emerge: first, the treatment of prices, which are invariant in classical theory but, according to the Hotelling rule, are changing through time for exhaustible resources; second, the notion and the measure of the rate of profits; and, third, the relationship between economic analysis and a more historical and sociological approach stressing the balances of power between classes. Our own approach starts from a very simple model, called the corn-guano model, where guano is the exhaustible resource, and examines the dynamics of such an economy on the physical side and the value side. These lessons serve as a basis for an extension to multisector models. We provide a critical assessment of a few alternative approaches developed by Sraffian scholars.