Resource allocation over time
We continued Lecture 5 through page 51, covering efficient allocation, user cost, scarcity rent, and Hotelling’s rule. Week 7 resumes at page 52 to finish the lecture, complete Classwork 5, and begin fishery dynamics.
Focus
- Marginal net benefit and two-period allocation
- User cost, scarcity rent, and Hotelling’s rule
- Depletion decisions and investing scarcity rent for the future
Prepare
- Review the allocation and discount-rate examples in Lecture 5
- Read TL Chapters 6–7 and the resource-allocation web reference
- Begin Homework 2 · Due Oct 9, 9:30 AM
Practice
- Compare present and future marginal net benefits
- Explain the opportunity cost of extracting one more unit now
- Use net price to explain an owner’s extraction decision
Guiding question
How should a fixed stock be allocated across generations—and what can we pass on after it is extracted?
Learning targets
- Derive marginal net benefit and compare it across two periods using present value.
- Find an efficient allocation of a fixed resource stock and explain its user cost.
- Connect scarcity rent to a resource owner’s decision about when to extract.
- Explain Hotelling’s rule using net price rather than the full market price.
- Explain how investing scarcity rent can support future income and why actual price paths can differ from Hotelling’s benchmark.
In-class sequence
- September 28 and 30: the resource-market model, two-period allocation, user cost, scarcity rent, and discount-rate comparisons.
- October 2: continued from Hotelling’s rule through page 51, Empirical Evidence on Hotelling’s Rule. Week 7 resumes at page 52, the Intertemporal Fairness section.
Lecture slides
Click inside a slide preview, then use:
- ←/→ or ↑/↓ to move through the slides;
- M to open the menu;
- F to enter fullscreen;
- E to enter or exit PDF export mode;
- Ctrl + Shift + F to search the slides;
- T to switch between light and dark mode; and
- Esc to exit the menu or fullscreen.
This week’s materials
TL refers to Tietenberg and Lewis, Natural Resource Economics: The Essentials, 2nd edition. Chapter numbers on this page follow that edition, not the larger Environmental and Natural Resource Economics textbook.
Reading: TL Chapter 6 — Dynamic Efficiency and Sustainable Development — and Chapter 7 — Depletable Resource Allocation Over Time: The Role of Longer Time Horizons, Substitutes and Extraction Cost. Use the web reading below for worked examples.
Coming next
Week 7 resumes Lecture 5 at page 52 (Intertemporal Fairness), finishes the lecture, and completes Classwork 5 before beginning fishery dynamics. Homework 2 is due October 9 at 9:30 AM. The fisheries topic develops renewable-resource dynamics with graphs rather than algebra.