A note on the logical inconsistency of the Hotelling Rule: A Revisit from the System's Analysis Perspective

Khabarov, N. ORCID: https://orcid.org/0000-0001-5372-4668, Smirnov, A. ORCID: https://orcid.org/0000-0003-1765-0782, & Obersteiner, M. ORCID: https://orcid.org/0000-0001-6981-2769 (2023). A note on the logical inconsistency of the Hotelling Rule: A Revisit from the System's Analysis Perspective. arXiv (Submitted)

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Abstract

The "Hotelling rule" (HR) called to be "the fundamental principle of the economics of exhaustible resources" has a logical deficiency which was never paid a sufficient attention to. This deficiency should be taken into account before attempting to explain discrepancies between the price prediction provided by the HR and historically observed prices. Our analysis is focused on the HR in its original form, we do not touch upon other aspects such as varying extraction costs and other ways of upgrading the original model underlying the Hotelling rule. We conclude that HR can not be derived from the simple models as it was claimed, therefore it should be understood as an assumption on its own, and not as a rule derived from other more basic assumptions.

Item Type:	Article
Research Programs:	Advancing Systems Analysis (ASA) Advancing Systems Analysis (ASA) > Exploratory Modeling of Human-natural Systems (EM) Biodiversity and Natural Resources (BNR) Biodiversity and Natural Resources (BNR) > Agriculture, Forestry, and Ecosystem Services (AFE)
Depositing User:	Luke Kirwan
Date Deposited:	29 Jan 2024 12:05
Last Modified:	29 Jan 2024 12:05
URI:	https://pure.iiasa.ac.at/19442

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