Resource Economics

All production and consumption require the use of natural resources. Resource economics seeks to determine the optimal extraction rate of these resources. Key to the determination of optimality is the need for extracting firms to balance the benefits that accrue today against the costs and benefits of leaving the resources for a later time.

Resource economists propose that nonrenewable resources should be valued differently from goods that can be regenerated or produced, because the former can be extracted only once. Developing this idea further, Harold Hotelling showed that the scarcity rent rate, which is the opportunity cost of using resources today, would rise at the rate of interest. The limited ability of renewable natural resources to regenerate themselves and the potential for stocks to be depleted ...