INTERGENERATIONAL RESOURCE RIGHTS, EFFICIENCY, AND SOCIAL OPTIMALITY

In resource economics the line demarcating efficiency and equity is often crossed. While political debates about resource exploitation over time are laden with questions of the proper distribution of our natural patrimony between generations, resource economists have predominantly espoused particular use rules that guarantee efficiency but overlook potential improvements in social welfare achievable through the reassignment of property rights across generations. We document the evolution and current status of the misuse of the term "optimal depletion', develop a simple two-generation, three-period general equilibrium model to illustrate how alternative distributions of resource rights between generations relate to alternative Pareto efficient solutions and demonstrate how different social welfare functions affect the optimal solution and associated assignment of resource rights between generations. -from Authors