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Economic Accounting in the Simple Hotelling Model

Robert Cairns

Resource and Energy Economics, 2018, vol. 51, issue C, 18-27

Abstract: Because of its simplicity, the simple Hotelling model of exhaustible-resource extraction is a useful vehicle to address two themes in economic accounting: (1) Foundational equalities in the calculation of depreciation and in double-entry bookkeeping, or circular flow, apply in both accounting and economics. (2) Incentives, decisions and outcomes are crucial in economics. It is argued that financial accounting satisfies the demands of the first theme but not the second and that green accounting falls short on both. Both can be satisfied if capital gains are included in net income and product. Comparisons are made to studies in general economics.

Keywords: Accounting; Exhaustible resource; Hotelling; Investment; Depreciation; Income; Capital gains (search for similar items in EconPapers)
JEL-codes: Q30 M41 (search for similar items in EconPapers)
Date: 2018
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