Time discounting in Harold Hotelling's approach to natural resource economics: The unsolved ethical question

Marco Vianna Franco, Marion Gaspard and Thomas Mueller

Ecological Economics, 2019, vol. 163, issue C, 52-60

Abstract: The paper focuses on Harold Hotelling's approach to time discounting in the context of the intertemporal allocation of exhaustible natural resources. In 1931, Hotelling introduces a positive discount rate when dealing with the “social value” or “total utility” derived from a resource. His position was in contrast with early economic literature on conservation, as well as with the point of view of Frank Ramsey, according to whom time discounting expressed an unjustified preference for the welfare of present generations over that of future ones. Hence, it has been argued that Hotelling dismissed ethical concerns. Using archival material, we find that, for Hotelling, economic questions should not be restricted to issues of economic efficiency; that his choice to discount utility – which he considered as analogous to a concrete benefit – at the interest rate is compatible with Ramsey's position; and, more broadly, that this choice does not preclude an ethical position on the desirable distribution of exhaustible resources through time. To Hotelling, ethics is implemented by politics, through fiscal corrections of the interest rate. Revisiting Hotelling on the articulation between ethics, allocative efficiency, and policies allows us to rethink the way we do that in current models using time discounting.

Keywords: Time discounting; Intergenerational equity; Exhaustible resources; Natural resource economics; Harold Hotelling (search for similar items in EconPapers)
JEL-codes: B31 Q30 Q50 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0921800918318603
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Time discounting in Harold Hotelling's approach to natural resource economics: the unsolved ethical question (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:163:y:2019:i:c:p:52-60

DOI: 10.1016/j.ecolecon.2019.05.005

Access Statistics for this article

Ecological Economics is currently edited by C. J. Cleveland

More articles in Ecological Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().