Proceedings of the Conference on Human and Economic Resources

The validity of the Hotelling’s rule, the fundamental theorem of nonrenewable resource economics, is limited by its partial equilibrium nature. One symptom of this limitation may be the disagreement between the empirical evidence, showing stable or declining resource prices, and the rule, predicting exponentially increasing prices. In this paper, we study the optimal depletion of a nonrenewable resource in a dynamic general equilibrium framework. We show that, in the long run, the price of a nonrenewable (i) is constant when the nonrenewable is essential in production, and (ii) increases only if the rate of return of capital is larger than the capital depreciation rate and the non-renewable is an inessential input in production. We believe that our model offers a theoretical explanation to non-growing nonrenewable prices and hence at least partially solves the paradox between the Hotelling’s rule and the empirical regularity. We also show that two factors play a crucial role in determining the long run behavior of nonrenewable prices, namely the elasticity of substitution between input factors, and the long run behavior of the real interest rate. Another major achievement of this study is the full analytical solution of the model under a Cobb-Douglas technology.

The Hotelling's Rule Revisited in a Dynamic General Equilibrium Model

The validity of the Hotelling?s rule, the fundamental theorem of nonrenewable resource eco- nomics, is limited by its partial equilibrium nature. One symptom of this limitation may be the disagreement between the empirical evidence, showing stable or declining resource prices, and the rule, predicting exponentially increasing prices. In this paper, we study the optimal depletion of a nonrenewable resource in a dynamic general equilibrium framework.We show that in, the long run, the price of a nonrenewable (i) is constant when the nonrenewable is essential in production, and (ii) it increases only if the rate of return of capital is larger than the capital depreciation rate and if the non-renewable is an inessential input in production. We believe that our model offers a theoretical explanation to non-growing nonrenewable prices and hence at least partially solves the paradox between the Hotelling's rule and the empirical regularities. We also show that two factors play a crucial role in determining the long run behavior of non-renewable prices, namely the elasticity of substitution between input factors, and the long run behavior of the real interest rate. Another major achievement of this study is the full analytical solution of the model under a Cobb-Douglas technology.Nonrenewable resources; One-sector growth model, Hotelling?s Rule, Sustainability

Faint Infrared Flares from the Microquasar GRS 1915+105

We present simultaneous infrared and X-ray observations of the Galactic microquasar GRS 1915+105 using the Palomar 5-m telescope and Rossi X-ray Timing Explorer on July 10, 1998 UT. Over the course of 5 hours, we observed 6 faint infrared (IR) flares with peak amplitudes of $\sim 0.3-0.6$ mJy and durations of $\sim 500-600$ seconds. These flares are associated with X-ray soft-dip/soft-flare cycles, as opposed to the brighter IR flares associated with X-ray hard-dip/soft-flare cycles seen in August 1997 by Eikenberry et al. (1998). Interestingly, the IR flares begin {\it before} the X-ray oscillations, implying an ``outside-in'' origin of the IR/X-ray cycle. We also show that the quasi-steady IR excess in August 1997 is due to the pile-up of similar faint flares. We discuss the implications of this flaring behavior for understanding jet formation in microquasars.Comment: 10 pages, 4 figures Accepted for publication in ApJ Letter