:"Not to be confused with
Hotelling's rule is defining the net price path as a function of time while maximising rent in the time of fully extracting a non-renewable natural resource. The maximum rent is also known as Hotelling rent or scarcity rent and is the maximum rent that could be obtained while emptying the stock resource.
Hotelling's rule is the result of analysis of non-renewable
resource managementby Harold Hotelling, published in the "Journal of Political Economy" in 1931. A similar result was published by L. C. Gray in 1914, considering the case of a single mine owner. Hotelling's result shows that in an efficient exploitation of a non-renewable and non-augmentable resource, the percentage change in net-price per unit of time should equal the discount ratein order to maximise the present value of the resource capital over the extraction period.
The simple rule can be expressed by the equilibrium situation representing the optimal solution.
when "P"("t") is the unit
profitat time "t" and is the discount rate.
economic rentobtained is an abnormal rent, often referred to as resource rent, since it generates from a situation where the resource owner has open access to the resource for free. The resource rent therefore equals the shadow value of the natural resource or natural capital.
The concept of
resource rentalso includes biological and other renewableresources.
* S. Devarajan and A. C. Fisher, (1981). Hotelling's "Economics of Exhaustible Resources": Fifty Years Later. Journal of Economic Literature, Vol. 19(1):65-73.
* L. C. Gray, (1914). Rent under the Assumption of Exhaustibility. Quart. J. Econ., Vol 28:466-489.
* H. Hotelling, (1931). The Economics of Exhaustible Resources. J. Polit. Econ., Vol. 39:137-175.
Von Thünen rent
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