Book contents
- Frontmatter
- Contents
- Preface to the second edition
- Preface to the first edition
- 1 Introduction: economics and environmental policy
- PART I On the theory of externalities
- 2 Relevance and the theory of externalities
- 3 Externalities: definition, significant types, and optimal-pricing conditions
- 4 Externalities: formal analysis
- 5 Uncertainty and the choice of policy instruments: price or quantity controls?
- 6 Market imperfections and the number of participants
- 7 Are competitive outputs with detrimental externalities necessarily excessive?
- 8 Detrimental externalities and nonconvexities in the production set
- 9 On optimal pricing of exhaustible resources
- PART II On the design of environmental policy
- Index
9 - On optimal pricing of exhaustible resources
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- Preface to the second edition
- Preface to the first edition
- 1 Introduction: economics and environmental policy
- PART I On the theory of externalities
- 2 Relevance and the theory of externalities
- 3 Externalities: definition, significant types, and optimal-pricing conditions
- 4 Externalities: formal analysis
- 5 Uncertainty and the choice of policy instruments: price or quantity controls?
- 6 Market imperfections and the number of participants
- 7 Are competitive outputs with detrimental externalities necessarily excessive?
- 8 Detrimental externalities and nonconvexities in the production set
- 9 On optimal pricing of exhaustible resources
- PART II On the design of environmental policy
- Index
Summary
As some growing scarcities have begun to alarm the public, the pricing of exhaustible resources has claimed increased attention. Thus, it seems appropriate to consider the issue here even though it represents something of a digression from the main line of our discussion. Here, again, optimality of pricing is defined in terms of resource allocation, but in this case the central issue is allocation among time periods rather than output categories. The results we will describe are all based largely on standard propositions of capital theory going back to the work of Irving Fisher and Bohm-Bawerk.
Yet when applied to exhaustible resources, some of our conclusions may be slightly surprising. For example, our instincts are likely to suggest that items in danger of depletion should tend to rise in price with the passage of time. We will see, however, that this is by no means generally true, and that, in some cases, optimality requires prices that decline, not only in discounted present value, but in current terms as well. Moreover, we will find that, although an optimal policy may call for prevention of the depletion of certain types of exhaustible resources, in other cases we should encourage their current utilization; obviously, this will be true of an item whose early use makes it possible to preserve some other resource whose returns to the future are larger. Clearly, in dealing with the allocation of resources over time, the issue of intergenerational equity arises unavoidably.
- Type
- Chapter
- Information
- The Theory of Environmental Policy , pp. 138 - 152Publisher: Cambridge University PressPrint publication year: 1988