Accounting for Income, Investment, and Capital Gains in the Simple Hotelling Model
Presenter(s)
Robert D Cairns
Abstract
This paper revisits accounting methodology in the canonical, Hotelling model of exhaustible-resource extraction. Wealth accounting is linked to social welfare. The resource is found to earn an income that should be recorded in the firm’s and the national accounts. The income, a capital gain, is related to the core question of the model, the timing of extraction. Investment of the resource, also neglected in other models, and capital gains correspond to one another in product and income. Comparisons are made to more general models of capital. The duality of income and capital is expressed through the fact that income is interest on capital value and capital value is discounted interest and depreciation.
Topic
Economics
Start Date
6-17-2016 8:30 AM
End Date
6-17-2016 8:50 AM
Room
High Country Conference Center
Recommended Citation
Cairns, Robert D., "Accounting for Income, Investment, and Capital Gains in the Simple Hotelling Model" (2016). World Conference on Natural Resource Modeling. 32.
https://scholarexchange.furman.edu/rma/all/presentations/32
Accounting for Income, Investment, and Capital Gains in the Simple Hotelling Model
High Country Conference Center
This paper revisits accounting methodology in the canonical, Hotelling model of exhaustible-resource extraction. Wealth accounting is linked to social welfare. The resource is found to earn an income that should be recorded in the firm’s and the national accounts. The income, a capital gain, is related to the core question of the model, the timing of extraction. Investment of the resource, also neglected in other models, and capital gains correspond to one another in product and income. Comparisons are made to more general models of capital. The duality of income and capital is expressed through the fact that income is interest on capital value and capital value is discounted interest and depreciation.