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Confuser Cost

Author

Listed:
  • Sittidaj Pongkijvorasin

    (Department of Economics, University of Hawaii at Manoa; Chulalongkorn University, Bangkok, Thailand)

  • James Roumasset

    (Department of Economics, University of Hawaii at Manoa)

Abstract

The terms “royalty”, “marginal user cost”, and “scarcity rent” are often used interchangeably in resource economics, resulting in considerable confusion. We suggest distinct and meaningful definitions for the terms “royalty”, “marginal user cost”, and “scarcity rent” and discuss the relationships among them. Using the example of extraction fees for leasees, we show how failing to understand the distinct meaning of these terms may lead to policy errors. By constructing a model containing both capital and resources as state variables, we verify that user cost in capital theory is a different concept than marginal user cost in resource economics and suggest a taxonomy to avoid misinterpretation.

Suggested Citation

  • Sittidaj Pongkijvorasin & James Roumasset, 2007. "Confuser Cost," Working Papers 200712, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:200712
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_07-12.pdf
    File Function: First version, 2007
    Download Restriction: no
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    References listed on IDEAS

    as
    1. Neher,Philip A., 1990. "Natural Resource Economics," Cambridge Books, Cambridge University Press, number 9780521311748, September.
    2. Michael A. Toman, 1986. ""Depletion Effects" and Nonrenewable Resource Supply: A Diagrammatic Exposition," Land Economics, University of Wisconsin Press, vol. 62(4), pages 341-352.
    3. W. Erwin Diewert, 2005. "Issues in the Measurement of Capital Services, Depreciation, Asset Price Changes, and Interest Rates," NBER Chapters, in: Measuring Capital in the New Economy, pages 479-556, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    renewable resources; marginal user cost; royalty; scarcity rent; shadow price; Hotelling rent; user cost of capital;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • A10 - General Economics and Teaching - - General Economics - - - General

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