A century of misunderstanding of a key tool in the economics of natural resources
Monday, May 11, 2020 - 09:00
in Mathematics & Economics
In the past few weeks, oil prices have fallen to record lows. This development was not predicted by the Hotelling rule, an equation proposed in 1931 that remains central to the economics of natural resources today. In an article published on 7 May 2020 in the Canadian Journal of Economics, economists Roberto Ferreira da Cunha, of the Berkeley Research Group, and Antoine Missemer, of the CNRS, present the results of a groundbreaking historical survey of documents from Harold Hotelling's archives. They show that in fact this 'rule' was not designed to investigate energy markets. More generally, their study questions the theoretical instruments used to address energy and environmental issues.