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Exhaustible natural resources, normal prices and intertemporal equilibrium

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  • Sergio Parrinello

Abstract

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.

Suggested Citation

  • Sergio Parrinello, 2002. "Exhaustible natural resources, normal prices and intertemporal equilibrium," Working Papers 57, University of Rome La Sapienza, Department of Public Economics.
  • Handle: RePEc:sap:wpaper:wp57
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    References listed on IDEAS

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    1. Christian Bidard & Guido Erreygers, 2001. "The Corn–Guano Model," Metroeconomica, Wiley Blackwell, vol. 52(3), pages 243-253, August.
    2. R. H. Strotz, 1955. "Myopia and Inconsistency in Dynamic Utility Maximization," Review of Economic Studies, Oxford University Press, vol. 23(3), pages 165-180.
    3. Heinz Kurz & Neri Salvadori, 1997. "Exhaustible Resources in a Dynamic Input-Output Model with 'Classical' Features," Economic Systems Research, Taylor & Francis Journals, vol. 9(3), pages 235-252.
    4. Heinz D. Kurz & Neri Salvadori, 2001. "Classical Economics and the Problem of Exhaustible Resources," Metroeconomica, Wiley Blackwell, vol. 52(3), pages 282-296, August.
    5. Kurz,Heinz D. & Salvadori,Neri, 1997. "Theory of Production," Cambridge Books, Cambridge University Press, number 9780521588676, March.
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    Cited by:

    1. Sergio Parrinello, 2004. "The Notion of Effectual Supply and the Theory of Normal Prices with Exhaustible Natural Resources," Economic Systems Research, Taylor & Francis Journals, vol. 16(3), pages 311-322.

    More about this item

    Keywords

    Exhaustible resources; Hotelling rule; normal prices; Sraffian analysis.;

    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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