nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

export demand us farm income and land prices 1945 1985 the growing openness of the u s economy has caused world supply and demand conditions to have significant farm level impacts emphasizing the important macroeconomic linkages between capital goods and factor markets in agriculture schuh 1983 this study considers the linkage from the international grain market to u s farm income in the post war period 194985 this linkage suggests that export demand may also have played an important role affecting land and other input prices through the derived demand relationship burt 1986 phipps 1984 and robison lins and venkataraman 1985 have each shown that land prices are closely tied to real and expected net returns to farming this study seeks to supplement their findings by examining the relative role of exports in determining these returns over time empirical results clearly show the export farm income connection the further linkage to land values while present is somewhat less clear

technical note delegating pricing responsibility to the salesforce in this paper we use an agency theory framework to address the issue of delegating pricing responsibility to the salesperson in this analysis it is shown that delegating the pricing responsibility to the salesperson is as profitable as centralization when the salesperson and the sales manager have identical information about the selling environment but delegation may be more profitable when the saleperson s information is superior to that of the sales manager s it is also argued that this characteristic is typical of market conditions where we observe delegation of such responsibility in cases identified by weinberg weinberg c b 1975 an optimal commission plan for salesman s control over price management sci 21 8 april 937 943 and stephenson cron and frazier stephenson p r w l cron g frazier 1979 delegating pricing authority to the salesforce the effects on sales and profit performance j marketing43 april 21 28

migration and intergroup conflict abstract two groups in conflict produce and appropriate internally generated consumable output in a two stage game assuming equal within group sharing and endogenous group sizes it is shown how agents leave groups with high productive efficiency and migrate to groups with high appropriative and defensive capabilities

production and conflict models versus rent seeking models a production and conflict p c model and a rent seeking rs model are compared for one group two groups and k groups adding a new agent enlarges the pie in the p c model but causes the fixed size pie to be allocated on one more rent seeker in the rs model the total production or rent is distributed within and between groups according to the within group and between group decisiveness productive and fighting efficiencies and group sizes play a role the collective action problem is more severe for the rs model as group size increases the ratio of within group to between group fighting increases marginally toward a constant for the p c model while it increases convexly for the rs model adding an additional agent to each of two groups is more detrimental to the utilities in rs groups than in p c groups while adding a second group of agents when there is already one group of agents gives the reverse result the severe between group fighting in the p c model for many groups causes the p c model to be preferable for few groups while the rs model is preferable for many groups applications are considered to intergroup migration inside versus outside ownership divestitures mergers and acquisitions multidivisional versus single tier firms and u form versus m form of economic organization

intertemporal equilibria and exhaustible resources an overlapping generations approach abstract this paper presents a general equilibrium model of an abstract intertemporal economy with overlapping generations production possibilities and capital investment under the constraint of a nonreproducible natural resource the model provides for institutionally mandated asset transfers between successive generations under the assumption that each generation has perfect foresight concerning future prices and economic conditions competitive exchange supports a multiplicity of pareto efficient equilibria that correspond to particular asset transfer regimes the achievement of a desirable distribution of welfare between present and future generations requires that the asset transfer regime be chosen according to a social welfare function or explicit distributional criterion economic efficiency per se is insufficient to ensure social optimality these results have important implications for resource planning in the real world where policy makers and the public at large are often highly concerned over the potential impacts of current resource utilization on the welfare of future generations

habit formation and exhaustible resource risk pricing abstract this paper studies the risk pricing implications of introducing habit formation in consumption in a model that encompasses growth with nonrenewable resources and capital markets it is shown that the expected return on nonrenewable resource stocks incorporates both short run and long run risk factors the short run risk factor is associated with shocks to current surplus consumption growth the long run risk factor reflects the investor s desire to hedge against long run shocks to future surplus consumption prospects long run habit risk premium the model is tested using energy commodities index and us aggregate real per capita consumption data and the results confirm that habit enters significantly in the pricing equation by entertaining a long run time varying risk coefficient compared to results obtained with a no habit formation model time separable preferences we found that long run future prospects of surplus consumption constitute a forward looking risk factor to be taken into account in explaining the dynamics of energy prices under uncertainty

empirical evidence of news about future prospects in the risk pricing of oil assets abstract this empirical paper investigates the relevance of long run risks associated with uncertainty shocks to future growth prospects news about future prospects for explaining the risk pricing of oil stocks an econometric method that incorporates dynamic factor analysis is used for estimating the pricing equation of oil stocks the results indicate that oil investors care about long run risks associated with future growth prospects long run risks account for almost half of the total risk premium of oil stocks long run risks associated with future growth prospects are significantly shaped by latent factors related to the labor market the price indices and financial markets moreover our estimated model captures some historical events including the oil crisis of the seventies the economic crisis of the mid eighties the stock market crash of 1987 and the economic crises of 1998 and 2000

a note on mining with investment in capital one of the principal predictions of the theory of the extractive firm is that its rate of output will decline steadily throughout time recently in this journal campbell 1980 presented an interesting analysis suggesting that this behaviour may be altered if one accounts for the fact that firms must invest in some level of fixed capital which is needed in combination with variable inputs to extract the resource in the campbell analysis the fixed capital places a constraint on the maximum rate of extraction it is shown that this constraint is binding and that extraction is therefore constant over some initial period of the mine when the firm behaves optimally this note demonstrates that the campbell result is due to a fixed proportions technology assumption in particular when a neoclassical technology is assumed one finds that the constraint imposed by the level of fixed capital is never binding and that the optimal extraction rate is strictly monotonically declining as a function of time i to demonstrate this an informal argument will suffice let k be the level of fixed capital chosen by the firm let lt be the amount of the variable factor employed in period t assume that the rate of extraction et is given by the production function2

intergenerational transfers and the social discount rate this paper investigates the relationship between intergenerational asset transfers and the choice of the discount rate for use in cost benefit analysis in a model of a competitive overlapping generations economy constrained by a socially managed exhaustible resource provided that there are no distortions in capital markets and that all agents hold perfect foresight cost benefit techniques will result in a pareto efficient resource allocation if the discount rate is set equal to the market rate of interest but since the path of the interest rate depends on the level of intergenerational transfers cost benefit techniques do not ensure a socially desirable distribution of welfare between generations a social optimum will result only if intergenerational transfers are properly chosen and enforced decentralized private altruism may result in intergenerational transfers that both present and future individuals would agree are too small if members of the present generation attach positive weight to the general welfare of future generations not simply their personal descendants in a world where intergenerational transfers are non optimal second best policy making may imply a constrained optimum that is inefficient together these findings suggest that cost benefit analysis is at best a partial criterion to policy formulation that should be used only in conjunction with ethical principles that define the proper distribution of welfare between present and future generations

tying the manager s hands constraining opportunistic managerial intervention we discuss and examine empirically a firm level equivalent of the ancient problem of tying the king s hands namely how to avoid managerial intervention that is undertaken to reap private benefits but is harmful to overall value creation that is managerial opportunism the link from managerial intervention to firm level value creation is moderated by employee motivation thus intervention in the form of managers overruling employees or reneging on delegation may demotivate employees particularly when the intervention is perceived as being unfair undertaken for personal gain etc we argue that a number of mechanisms such as managers staking their personal reputation employees controlling important assets strong trade unions etc may function as constraints on managerial proclivities to intervene thus reducing the problem of managerial opportunism we derive four hypotheses from these ideas and test them using path analysis on a rich dataset based on 329 firms in the spanish food and electric electronic industries

the architecture of economic systems hierarchies and polyarchies the authors present new ways of looking at economic organizations andsystems individuals judgments entail errors they sometimes reject good projects and accept bad projects the architecture of an economicsystem specifying how the decision making units are organized togetherwithin a system who gathers what information and who communicates what with whom affects its performance both because it influences thenature of errors that individuals make within the system and becauseit has a critical effect on the aggregation of individuals errors theperformance of two polar architectures decentralized polyarchical versus centralized hierarchical decision making authorities are analyzed and compared copyright 1986 by american economic association

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

the distribution of income in a despotic society a distribution of income between rulers and subjects can be derived as an equilibrium of violence rather than from considerations of marginal products of owned factors of production society is organized in ranks and the occupants of each rank are provided with incomes just sufficient that obedience is preferable to rebellion to incorporate such considerations into a model it is necessary to recognize phenomena that are normally excluded from economic analysis combat the mortality rate from natural causes and from violence as a component of the utility function and a rudimentary technology of control

a general equilibrium model of two group conflict with endogenous intra group sharing rules this paper explores the interactions among intra group sharing rules the competition between two groups over the common pool of output and the allocation of resources between productive and appropriate activities in the interior solution the use of egalitarian method for the distribution of group income among members plays no distributional role but only affects the allocation of resources it releases resources into the productive sector from the group that adopts the egalitarian rule by making the internal conflict among the members less intense the sequential choice of intra group sharing rules and resource allocations produce the adoption of fully egalitarian intra group sharing rules in both groups these rules minimize the amount of resources allocated to appropriate activities and maximize the welfare level of all individuals in the economy this result suggests that inter group competition with the use of egalitarian principle in the distribution of group income among group members which is not available to the hobbesian state of nature is one of the cheaper social devices in restraining individuals from engaging in costly appropriative activities

the distribution of income in the presence of appropriative activities we examine the distribution of income when agents allocate their initial endowments between production and appropriation arms investments influence or rent seeking activities final output depends on the productive contributions of the agents but is divided between them according to their relative contributions in appropriation various possible improvements in an agent s useful productivity reduce the agent s equilibrium share of income but increases in initial endowments increase an agent s share we contrast our results to those that would obtain in the competitive counterpart to our model and discuss its relevance both for history and for the present the results extend to a class of models where distribution is determined between two groups of agents with agents within each group behaving non cooperatively but without exhibiting the free rider problem

endogenous sharing rules in collective group rent seeking this paper examines the possibility of endogenous determination of intra group sharing rules in a collective group rent seeking game collective group rent seeking is considered as a two stage nash cournot game in which sharing rules are determined prior to individual decision on voluntary contribution the solution is subgame perfect and is obtained by backward induction in competition between two groups of the same size the nash equilibrium sharing rule of each group is to distribute rent to each according to relative effort total rent seeking outlays in this case are equal to those obtained by tullock 1980 when more than two groups compete for a rent the sharing rule based on relative effort is again likely to be the nash equilibrium strategy of each group the amount of total rent seeking outlays is also equal to that in tullock 1980 in a nutshell the rent is substantially dissipated if sharing rules are endogenously determined

collective rent dissipation the theory of rent seeking was initiated by tullock 1967 1980 followed by krueger 1974 and posner 1975 and more recently extended in various directions by allard 1988 appelbaum and katz 1986a b c gradstein and nitzan 1989 hillman and katz 1984 1987 hillman and samet 1987 hillman and riley 1989 katz et al 1990 long and vousden 1987 ursprung 1990 and varian 1989 the purpose of this paper is to extend this theory by introducing the possibility of collective group rent seeking with voluntary individual decisions regarding their extent of participation in the collective rent seeking efforts

a simple nonadditive preference structure for models of household behavior over time intertemporal separability is an almost universal assumption in empirical work on household behavior but a good deal of recent work on consumption and labor supply suggests that it may not be tenable the traditional weakening of this assumption is to allow for habit formation i propose an alternative structure for intertemporal preferences that nests intertemporal additivity in a simple way and yields closed form solutions for demand functions this structure includes the neoclassical durables model as a special case i derive a demand system that nests the almost ideal system as its time separable counterpart this model is estimated on u k aggregate time series data for seven goods time separability is decisively rejected moreover i find that ignoring temporal dependencies leads to considerable bias in the estimates of elasticities of the seven goods durables display the strongest nonseparable effect the estimated reactions are consistent with the neoclassical durables model

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

anarchy and its breakdown anarchy defined as a system in which participants can seize and defend resources without regulation from above is not chaos but rather a spontaneous order however anarchy is fragile and may dissolve either into formless amorphy or into a more organized system such as hierarchy under anarchy each contestant balances between productive exploitation of the current resource base and fighting to acquire or defend resources anarchy is sustainable only when there are strongly diminishing returns to fighting effort the decisiveness parameter is sufficiently low and incomes exceed the viability minimum these considerations explain many features of animal and human conflict

intergenerational competitive equilibria under technological uncertainty and an exhaustible resource constraint abstract this paper presents a model of competitive intertemporal equilibrium in a finite horizon overlapping generations economy facing technological uncertainty and an exhaustible resource constraint individuals form rational expectations regarding future prices and economic conditions and income is redistributed from one generation to the next through government mandated lump sum transfers under uncertainty the relationship between resource price appreciation and the interest rate is mediated by consumers risk aversion with respect to consumption in alternative states of nature the intuitively appealing proposition that the expected resource price rises at the expected rate of interest holds only as a special case if future generations are taken to be state contingent in the sense that their composition depends on the states of nature prevailing when they are born then equilibria are generally pareto efficient but if future generations are state independent so that the set of individuals born at a given date is independent of the prevailing state of nature then equilibria may be inefficient because markets do not exist where successive generations may equilibrate their marginal rates of substitution across consumption in alternative contingent states such inefficiencies may be remedied through the implementation of appropriate intergenerational transfers an optimal intergenerational welfare distribution may be supported as a competitive equilibrium if the income transfer regime is properly selected and enforced the social optima that result for a simple version of the model under the maximin welfare criterion indicate that greater sacrifices are required on the part of the present generation when future generations are taken to be state contingent than when they are regarded as state independent this finding provides a possible explanation for the extreme risk aversion of conservationists with respect to the welfare of future generations

the social discount rate what discount rate should be applied to social investments it is standard to use the market interest rate thereby respecting private preferences we show that application of this revealed preference criterion rests on faith not on logic it is justified only if preferences over all choices including past choices are time invariant the conditions for this to be true are stringent under more reasonable conditions policy makers should be more patient than private citizens whose choices define the most short sighted pareto optimum

the global stability of efficient intertemporal allocations this paper describes a continuous time model of an economy with finitely many infinitely lived consumers and a finite number of capital goods two objectives are achieved first recursive nonadditive utility functionals are formulated and analyzed second these preference functionals are applied to analyze the nature of efficient allocations in a dynamic economy two classes of global turnpike propositions are proven which provide the basis for a model of the long run distribution of wealth these propositions also provide new perspective regarding existing stability literature based on additive utilities copyright 1987 by the econometric society

the rate of time preference and dynamic economic analysis strong restrictions on the structure of preferences are a central feature in the received theory of intertemporal allocation in fact most of the modern literature concerned with capital theoretic problems represents preferences by a functional in which an additive utility function is discounted by a constant rate of time preference this specification is attractive because it is analytically tractable in dynamic models and it clearly delineates how tastes and opportunities interact to determine an economy s household s paths of consumption and capital formation however its rigid structure constancy of time preference severely limits the conclusions and explanatory power of the corresponding models this paper considers a class of utility functionals in continuous time which have the appealing feature that the rate of time preference depends systematically on an index of aggregate future consumption the more flexible structure embodied in these functionals leads to important generalizations and

net national product as an indicator of sustainability net national product nnp can potentially serve several objectives among others to measure value added and to be an indicator of welfare in the aftermath of the world commission on environment and development however it also seems important to investigate whether the concept of nnp can serve as an indicator of sustainability my point of departure following hicks 1946 ch 14 is therefore to require that nnp should measure what can be consumed in the present period without reducing future consumption possibilities and in line with this to argue that the nnp should equal the maximum per capita consumption level that can be sustained if sufficiently many facilitating assumptions are made then a concept of nnp that serves as an exact indicator of sustainability can easily be constructed for instance for a closed economy with a constant population a stationary technology and with only one capital good it follows that the present does not reduce future consumption possibilities if and only if it does not decrease the stock of the single capital good hence under the assumption that the one capital good k is identical to the one consumption good x nnp defined as y x k measures the maximal sustainable consumption at time t because then x y is equivalent to k the purpose of this note is to establish that with multiple capital goods it is not in general possible to construct an exact indicator of sustainability on the

induced agricultural innovation and environmental quality the case of groundwater regulation induced innovation in agriculture includes the impacts of technology on environmental quality the induced innovation hypothesis maintains that technological change substitutes abundant factors for scarce ones hayami and ruttan 1985 this hypothesis may be extended by arguing that agricultural technology change often affects the quality of factors of production such as groundwater or soil fertility once adopted for example irrigation technology may affect groundwater quality yet the market often fails to reflect the scarcity value of environmental quality characteristics

the welfare economic theory of green national accounts this paper takes a critical look at the literature on green national accounts the problem studied is to find a linear index of economic variables that responds to perturbations in the same direction as social well being the thesis of a large literature that net national product which is a flow is that index in closed economies is shown in some interpretations to be simply false and in others to suffer from deep estimation problems it is argued that capital depreciation using shadow prices should certainly be included in national accounts but that the right welfare index is a comprehensive measure of wealth defined as the shadow value of an economy s stock of all capital assets it is shown that comprehensive wealth is usable as a criterion for policy evaluation as well as for determining sustainable economic development

cooperation and between group competition abstract introducing competition between groups may induce cooperation to emerge in defection games despite considerable cost of cooperation if the groups can confine themselves to a cooperative sector either by providing incentives to raise the cooperation level in one group or by providing disincentives so that the cooperation level in the other group gets lowered to match that of the first maximum degrees of cooperation can be obtained the cooperative sector broadens as the degrees of cooperation increase or the cost of cooperation decreases or the group benefits of cooperation increase

a review of the stern review on the economics of climate change the stern review calls for immediate decisive action to stabilize greenhouse gases because the benefits of strong early action on climate change outweighs the costs the economic analysis supporting this conclusion consists mostly of two basic strands the first strand is a formal aggregative model that relies for its conclusions primari ly upon imposing a very low discount rate concerning this discount rate aspect i am skeptical of the review s formal analysis but this essay points out that we are actual ly a lot less sure about what interest rate should be used for discounting climate change than is commonly acknowledged the review s second basic strand is a more intuitive argument that it might be very important to avoid possibly large uncertain ties that are difficult to quantify concerning this uncertainty aspect i argue that it might be recast into sound analytical reasoning that might justify some of the review s conclusions the basic issue here is that spending money to slow global warming should perhaps not be conceptualized primarily as being about consump tion smoothing as much as being about how much insurance to buy to offset the small change of a ruinous catastrophe that is difficult to compensate by ordinary savings

departmentalization and stochastic dissimilarity abstract when activities within the organization are confronted with different types of stochastic environments the owner of the firm has to evaluate the benefits and the costs involved in establishing multiple specialized divisions the benefit from departmentalization is the ability to better match incentives to the extent of uncertainty confronting different activities the cost of departmentalization is the increase in the number of required managerial positions which implies that the owner has to deal with a bigger number of individuals that can assume only limited risk only when the extent of stochastic dissimilarity among activities is significant can the benefit more than outweigh the cost

sectoral supply of minerals of varying quality in this sectoral model of mineral production investment in capacity and variation in orebody grade and volume help explain some stylized facts more than one grade of ore may be exploited simultaneously mine exhaustion but not necessarily entry occurs in declining order of grade the price may rise or fall but is likely to fall initially young industry and must eventually rise at less than the interest rate unless demand expands rapidly these trends exhibit fluctuations due to entry and exhaustion of deposits resource price cyclicality is reinforced because mines keep producing at capacity when the price is falling

does empowerment lead to higher quality and profitability abstract this paper examines the implications of alternative empowerment regimes on a firm s product quality and profitability when ownership and management of the firm are separated and it faces environmental uncertainties the analyses of a three stage game highlight the circumstances under which empowering a manager to make quality investment decisions results in higher profitability and or product quality when delegation reduces a manager s disutility either monitored or complete empowerment arise as the preferred management system if delegation increases the manager s disutility of effort and uncertainties about consumers preferences are small forcing may become the preferred management system

20th anniversary of eaere the european association of environmental and resource economists environmental and resource economics occupies a curious place in contemporary economics i know of no economist who does not regard nature to be a vital capital asset nor do i know any economist who does not regard humanity s dealings with nature to involve inter temporal externalities and yet most economists appear to be convinced that technological advances and the accumulation of reproducible capital and growth in human capital can overcome diminutions in natural capital otherwise it is hard to explain why twentieth century economics has been so detached from the environmental sciences judging by the profession s writings we economists see nature when we see it at all as a backdrop from which resources and services can be drawn in isolation macroeconomic forecasts routinely exclude natural capital and accounting for nature if it comes into the calculus at all is an afterthought to the real business of doing economics when asked economists acknowledge nature s existence but many deny she is worth much at the margin i have heard professional colleagues remark at seminars that the services nature provides amount at best to 2 3 of an economy s output which is the share of agriculture in the gross domestic product of the united states why they ask should one incorporate a capital asset in macro economic models of growth and distribution when it is of negligible importance typically growth models assume that nature is a fixed indestructible factor of production 1 the problem with the assumption is that it is wrong nature consists of degradable resources agricultural land forests watersheds fisheries fresh water sources wetlands the atmosphere more generally ecosystems are assets that are self regenerative but suffer from depletion or deterioration when they are over used 2 the innumerable processes that characterize nature run at different speeds and operate at different spatial scales which give rise to positive feedback loops that unless countered can mean catastrophes for people ranging from village communities to populations covering entire biomes moreover the environmental sciences tell us that the elasticity of substitution between reproducible capital and

rent seeking for pure public goods in this paper we present a formal analysis of rent seeking for public goods by two or more groups with different numbers of individuals we begin by considering equally wealthy groups under risk neutrality a case which constitutes our basic model several surprising and interesting results emerge from the analysis of this basic case the problem is then extended to deal with a groups with different wealth levels and b risk aversion this last extension brings about a further crop of interesting and useful results

rent seeking with non identical sharing rules the primary object of this paper is to examine the role of differential sharing rules within a collective rent seeking setting on the possible non existence of nash equilibrium focusing on groups that distribute part of the rent equally among their members and the residual according to relative effort we show that in rent seeking societies applying the two polar sharing rules equilibrium never exists in the general case where groups apply different but not necessarily the polar sharing rules we study the relationship between group variability in distributing rents and the problem of non existence of equilibrium in the rent seeking game

exhaustibility and risk as asset class dimensions a social investor approach to capital resource economies this paper develops a framework in which asset class dimensions are extended to include both risk and exhaustibility for explaining the evolution of shadow prices of marginal units of exhaustible natural resources in capital resource economies it is shown that the pricing kernel function required for socially valuing marginal units of exhaustible resource hereafter called the exhaustion stochastic discount factor combines a factor that discounts for risk and another factor that discounts for resource exhaustion over time the social rate of return on the marginal unit of resource stock adds to the risk premium an exhaustion premium that accounts for the resource depletion over time in this setting the principle of no arbitrage holds by extending asset class dimensions to include not only a risk dimension but also an exhaustibility dimension

option value under income and price uncertainty abstract we present a rigorous examination of the sign of option value under income and price uncertainty we state and prove three theorems on the sign of option value when preferences are state independent if income is uncertain the sign of option value is opposite the sign of the income elasticity of the good in question the analysis of price uncertainty is in two parts one covers the case of own price uncertainty and the other the case where the price of some other good is uncertain in both cases the sign of option value is generally ambiguous

a test of the hotelling valuation principle time series tests of the hotelling r percent rule for natural resource prices have not been strongly supportive but the tests and the data are subject to serious difficulties we propose here an alternative testing strategy based on another but less widely known implication of the hotelling model we test this implication which we call the hotelling valuation principle by regressing the market values of the reserves of a sample of u s domestic oiland gas producing companies on their estimated hotelling values we find that the estimated hotelling values account for a significant portion of the observed variations in market values and that the hotelling measures are better indicators of the market values of petroleum properties than two widely cited publicly available alternative appraisals

swords or plowshares a theory of the security of claims to property this paper develops a general equilibrium model of the allocation of resources among appropriative and productive activities the model emphasizes the distinction between offensive weapons which are the instruments of predation and fortifications which provide defense against predation the analysis of this model shows how the equilibrium security of claims to property is determined the analysis focuses on the possibility of a nonaggressive equilibrium in which no resources are allocated to offensive weapons and claims to property are fully secure we also analyze the complex relation between economic welfare and the security of claims to property we find for example that a relatively poor agent could be better off in an equilibrium with less secure claims to property

a review of the stern review on the economics of climate change how much and how fast should we react to the threat of global warming the stern review argues that the damages from climate change are large and that nations should undertake sharp and immediate reductions in greenhouse gas emissions an examination of the review s radical revision of the economics of climate change finds however that it depends decisively on the assumption of a near zero time discount rate combined with a specific utility function the review s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today s marketplace real interest rates and savings rates

information and exhaustible resources a bayesian analysis abstract we develop a continuous time bayesian model of investment in information about an exhaustible resource because of the way that information affects expectations the deterministic hotelling rule turns out to be more appropriate as a description of how resource owners forecast the value of their stocks than as a predictor of observed changes in the resource price a flow of information generates both unanticipated changes in expectations which cause the mean rate of change in the resource price to deviate systematically from the deterministic hotelling rule and reductions in uncertainty which do not affect the hotelling prediction

intergenerational resource rights efficiency and social optimality the discipline of economics is generally defined as the science of the allocation of scarce resources between competing social objectives given an initial distribution of resources between economic agents how would they behave so as to improve their welfare according to the pareto criterion the agents would exchange commodities until the opportunities for fruitful exchange were fully exhausted and no agent could be made better off without rendering at least one other agent worse off pareto efficiency is a powerful concept in microeconomic analysis provided that the initial distribution of property rights is equitable allocative efficiency gives rise to the best of all possible worlds acknowledging that the assumptions of perfect competition are often violated firms are monopolistic information is incomplete and externalities exist economists have argued for the modification of institutions so that economic reality will conform more closely to the assumptions of the model that yields such gratifying results but microeconomic theory has always maintained that allocative efficiency is in itself insufficient to maximize social welfare bator 1957 a social welfare function is required to discriminate a social optimum among the array of efficient allocations that correspond to alternative assignments of property rights though economists have posited alternative functional forms for the sake of pursuing conceptual arguments welfare functions have remained elusive constructs for well known theoretical and practical reasons consequently a sharp line of demarcation has been drawn between questions of efficiency the province of economics and equity the principal focus of ethical and political discourse in resource economics however the line demarcating efficiency and equity is often crossed the term optimal depletion appears regularly where only efficient depletion is meant while political debates about resource exploitation over time are laden with questions of the proper distribution of our natural patrimony between generations resource economists have predominantly espoused particular use rules that guarantee efficiency but overlook potential improvements in social welfare achievable through the reassignment of property rights across generations we document the evolution and current status of the misuse of the term optimal depletion in section ii we develop a simple two generation three period general equilibrium model in section iii to illustrate how alternative distributions of resource rights between generations relate to alternative pareto efficient solutions in section iv we demonstrate how different social welfare functions affect the optimal solution and associated assignment of resource rights between generations

mutual raiding of production and the emergence of exchange joint exchange and raiding can emerge in a world of mutual raiding when the appropriated production is less valuable to the appropriator than to the defender and the defense is not too inferior to attack the amounts of resources allocated to production and raiding and the amounts of goods exchanged reciprocally are determined endogenously the model reduces to pure exchange and pure raiding as special cases pure exchange emerges when the usability of appropriation is sufficiently low pure raiding emerges if the defense is sufficiently inferior to attack the results of the model are intermediate between the results of the two extreme cases jel c6 c72 d51 d72 d74 f10 i introduction in the american civil war each side to some extent looted the other still some true reciprocal exchange between the two sides was conducted by blockade runners whereby the south exported cotton and imported manufactured goods varying across time space pure market exchange may be supplemented by or grow out of such activities as war piracy 1 corruption 2 extortion 3 crime 4 plundering or theft referred to as raiding or mutual raiding generally agents individuals groups companies nations can meet their consumption needs by exchange of goods in accordance with comparative advantage or else by attempts at confiscating the other s production resources goods or trade flows each route has been the subject of separate study this article develops a model in which the equilibrium balance between the two ways of acquiring desired goods is determined by the values of various parameters governing the productive and conflictual processes involved how can exchange conducted voluntarily and with mutual advantage emerge in a world where appropriation and defense through mutual raiding appear to be more natural means of survival 5 classical economics describes how agents exchange goods reciprocally voluntarily and nonviolently 6 political economy describes how agents appropriate and defend one productive resource without reciprocal exchange 7 a few authors attempt to integrate production exchange and appropriation 8 this article lets two agents exchange goods reciprocally and raid each other s production mutually hausken 2003 33 36 classifies the 78 possible models in the exhaustive spirit of rapoport and guyer 1966 for how one or several of the five objects production resources consumption goods exports and imports can be set under attack as is also the case for rider 1999 anderton et al 1999 and anderton 1999 this article utilizes ratio forms of the contest success function 9 reduction to a pure exchange model presented in section ii or a pure raiding model occurs by adjusting parameters also assuming raiding of production rider 1999 claims that pure exchange is impossible 10 which is correct when the production is equally valuable to the appropriator and defender rider shows that in the absence of pure exchange it could turn out and in fact it inevitably turns out that the advantages of diversified consumption achieved by mutual raiding exceeds the wastage of fighting effort if his result were universal one would not observe pure exchange in the real world which in fact we do accordingly this article shows that rider s 1999 result is not inevitable even when accepting his assumption that each agent produces only one of the two desired goods we believe that the two characteristics value of appropriation and superiority of defense over attack 11 are realistic and help explain the empirics as well as reciprocal exchange in the real world 12 regarding the first characteristic grossman and kim 1995 1279 present the following argument which is contrary to most contest models which let appropriated objects be equally valuable to the appropriator and the defender we also allow for the possibility that predation is destructive by which we mean that in any appropriative interaction the predator gains less than the prey loses

investing exhaustible resource rents and the path of consumption we set out dollar valued net national product for an economy with a wasting essential stock oil deposit we take up maintaining capital intact and locally unchan ging consumption the percentage change in net investment or genuine savings relative to the market rate of interest denotes whether current consumption is rising

equilibrium structure in an economic model of conflict four different types of equilibrium are possible within a two player model of society where only armed self enforcement of property rights is possible the main underlying parameters are the total resource endowment and the initial distribution of this endowment between the players the parameter space is partitioned into regions in which the respective types of equilibrium occur the equilibrium types involve positive arms expenditure by respectively neither player the richer player and both players the latter case involves a sub type in which the poorer player s entire endowment is expended on arms jel d30 d72 d74