THE OPTIMAL CONSUMPTION OF DEPLETABLE NATURAL RESOURCES: AN ELABORATION, CORRECTION, AND EXTENSION.

This article further elaborates, corrects and extends the optimal consumption of depletable natural resources. Competitive behavior in an extractive industry with increasing marginal costs of production will generate a socially efficient pattern of production over time. The authors' analysis of this result assumed that marginal extraction costs at a mine depend only on the amount extracted from the mine to date. This clarifies the author's original proof and goes on to consider more explicitly what happens when extraction costs depend not only on the amount extracted at each site but also on the firm doing the extraction. When costs of extraction at a site depend only on the cumulative amount extracted there to date, all that is required for efficiency is that there be competitive markets for the extracted commodity.