Accounting price of an exhaustible resource: response and extensions

Hamilton, Kirk and Ruta, Giovanni (2016) Accounting price of an exhaustible resource: response and extensions. Environmental and Resource Economics, 68 (3). pp. 527-536. ISSN 0924-6460

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Abstract

Wei (Environ Resour Econ 60:579–581, 2015) presents a novel derivation of the accounting price for an exhaustible resource in a non-optimal economy subject to an allocation mechanism. We show that Wei (2015) and Hamilton and Ruta (Environ Resour Econ 42:53–64, 2009) are in fact employing different and mutually exclusive allocation mechanisms for the economy, and this explains the differences between the respective accounting prices. Because accounting prices must be defined subject to the allocation mechanism for the economy, the prices derived in the two papers are equally valid within their respective allocation domains. Further analysis shows that if there is declining marginal product of factors, a ‘Hartwick investment rule’ for the model economy (set investment just equal to depletion, valued at the accounting price) will lead to declining consumption for the Wei (2015) accounting price, and increasing consumption for the Hamilton and Ruta (2009) accounting price. This result is extended to consider the accounting standards recommended in the UN SEEA (System of environmental-economic accounting 2012: central framework. United Nations, European Commission, Food and Agriculture Organization of the United Nations, International Monetary Fund, Organisation for Economic Co-operation and Development, World Bank, 2012), as well as accounting for environmental externalities from resource use.

Item Type:	Article
Official URL:	http://link.springer.com/journal/10640
Additional Information:	© 2016 Springer Science+Business Media
Divisions:	Grantham Research Institute
Subjects:	G Geography. Anthropology. Recreation > GF Human ecology. Anthropogeography H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce > HF5601 Accounting
JEL classification:	Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q32 - Exhaustible Resources and Economic Development Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q53 - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting; Environmental Equity
Date Deposited:	17 Jun 2016 13:50
Last Modified:	10 Oct 2024 16:03
URI:	http://eprints.lse.ac.uk/id/eprint/66941

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