Pitfalls in a Received Idea: Ricardian Decreasing Returns at the Extensive Margin of a Natural Resource

Francis Taurand and Nguyen Manh Hung

Canadian Journal of Economics, 1987, vol. 20, issue 1, 61-73

Abstract: The Ricardian theory of constantly decreasing returns on additional units of a self-renewable resource states that "best resources are used first, except for location and technical change." Using modern economic theory, the authors show this result to be an unfounded prejudice. Their model of the original Ricardian land problem easily displays initial increasing returns, thus solving a 150-year-old empirical puzzle, H. Carey's paradox of switches in historical land use patterns. The Ricardian result may be empirically correct in specific cases but cannot claim general theoretical validity.

Date: 1987
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