Intergenerational Equity and the Investing of Rents from Exhaustible Resources

Abstract

Invest all profits or rents from exhaustible resources in reproducible capital such as machines. M. J. Beckmann, R. M. Solow, J. L. Solow and Frederic Wan have used the Cobb-Douglas technology in their analyses of utilization of exhaustible resources in aggregate dynamic models. The intergenerational equity result has been established in a Uzawa two-sector model with an exhaustible resource. The interest in intergenerational equity was aroused by remarks of John Rawls. Rawls was concerned with the problem of balancing the relative burden of savings on early generations with the burden on later generations. A perusal of the mathematics of Solow&s;s paper indicates that this result was implicit in his mathe-matics, society should invest the current returns from the utilization of flows from the stock of exhaustible resources. With exhaustible resources, one must be concerned with forestalling decumulation of society&s;s productive capital in order to achieve some notion of inter-generational equity.