Neo-Ricardian contribution to the theory of non-reproducible resources

While a few mainstream economists have contributed to the theory of exhaust­ible resources, extending and generalizing the Hotelling rule, alternative theories of non-renewable resources have been developed by non-mainstream economists, par­ticularly economists called neo-Ricardian.

The focal point of the neo-Ricardian theory of non-renewable resources is how to deal with dynamic aspects caused by the use of non-renewable resources in a Sraffian type of multi-sectoral model. Although there are slight differences among those economists in solving the long-run equilibrium problem, they are successful in making a consistent model, deducing a dynamic equilibrium path.

It must be noted that the neo-Ricardian interpretation of a non-renewable resource is different from that of mainstream economics. In the latter, it is assumed that the resource is homogenous, and that extraction of the resource is only constrained by the amount of the resource stock left from the former period. On the other hand, the former consid­ers that various mines with different productivity are extracted at the same time, and that extraction at each period is subject to a capacity constraint.

Yet, neo-Ricardian economists also adopt the Hotelling rule, which is interpreted as the rule showing a change of royalties for conservation of the resource in situ. Interestingly, it can be shown that the prices of commodities produced by means of the non-renewable resource do not change on certain conditions, although the royalties and thus the price of the resource increase according to the Hotelling rule (Kurz and Salvadori 2014: ch. 15). This is because the increase in the royalties may possibly be cancelled out by the decrease in the rent. Clearly, this treatment reflects reality, since an increase in prices of non-renewable resources does not always mean a change of prices of the commodities produced by means of those resources.

Finally, I refer to an interesting application of the corn-guano model to waste man­agement and recycling. Hosoda (2001) demonstrates how a waste disposal technique is switched to a recycling technique by taking the constraint of landfill space as a non- renewable resource into account. This shows how fertile the neo-Ricardian analyses of non-renewable resources are.