Lecture

Hotelling's Rule: Implications

Description

This lecture explores Hotelling's rule, which states that the resource rent must grow at the rate of interest. It discusses how resource prices must grow with the rate of interest if extraction costs are constant. The implications of Hotelling's rule on the intertemporal slope of the resource rent, the level of rent determined by demand, and the impact of interest rates on extraction rates are also examined. The lecture delves into the assumptions of the model, unexpected resource discoveries, and changes in extraction costs. It concludes by discussing the possibility of continued growth with finite resources, the role of backstop technologies, and the importance of reserves in sustainable development.

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