Handbook on the Economics of Natural Resources

Handbook on the Economics of Natural Resources

Edited by Robert Halvorsen and David F. Layton

The topics discussed in the Handbook on the Economics of Natural Resources are essential for those looking to understand how best to use and conserve the resources that form the foundation for human well-being. These include nonrenewable resources, modeling of biological resources, conservation of biological resources and water resources. The expert contributors of this Handbook provide solutions to many of the problems that growing populations now face, and sketch the likely future developments in the field of natural resource economics whilst paving the way for new thinking.

Chapter 1: Basic economics of nonrenewable resource use

John M. Hartwick

Subjects: economics and finance, environmental economics, environment, environmental economics


This is an overview of the economics of extraction of a nonrenewable resource in the tradition of Hotelling (1931). It covers some detail of the structure of the extractive competitive firm and of the extractive industry comprising in one case competitive small firms and in another a monopoly firm. I also present notes on the case of oligopoly in extraction, although this topic is not gone into in detail since it has developed with a variety of approaches and with a large number of interesting contributions. The approach deals with the firm and the industry, and not with economy-wide models. Economy-wide models are well surveyed by van der Ploeg (2011), an article with some 225 references. The overview follows from the first half of a first-year graduate course I have taught over some 20 years. The overview is light on empirical work on the economics of extraction, although there are some brief digressions into this literature. The narrative line is mostly historical.