The volume's scarcity rents have rested, so far, upon supplies that are fixed but permanent — the land that yields its rent forever, the location that does not wear out with use. This plate turns to a scarcity of a different and starker kind: the resource that is fixed in total and consumed in the using — the oil, the ore, the seam of coal, the wealth the earth holds in finite store and will not replace. Every unit taken is one unit less for all time; and so the question of its rent is not only the volume's usual one, of who shall have it, but a new and graver one — when it should be taken, and how much should be left for those who come after. The plate follows the founding insight of Hotelling, who saw the resource in the ground as an asset that must appreciate or be sold; finds in the resource rent the volume's scarcity rent carried out of space and into time; and arrives at a question the other rents never raised — what the present owes the future, when it lives by spending an inheritance that cannot be remade. And it will find that even the fixity on which the whole thing rests is, in the world if not in the model, a great deal less fixed than it seems.
Begin with what sets the resource apart from the land. The land, however scarce, is not consumed: the same acre that yields its rent this year will yield it again the next, and the next, forever — a perpetual flow from a stock that never diminishes. But the barrel of oil, once burned, is gone; the ore, once smelted, will not regrow; the coal seam, once worked out, is worked out for all of time. The exhaustible resource is a fixed and finite stock, drawn down by every act of use toward an exhaustion that is final and complete. And this transforms the very nature of its scarcity. The scarcity of land is a scarcity in space — there is only so much of it, here and now, spread across the surface of the earth. The scarcity of the resource is a scarcity in time — there is only so much of it ever, across all the years there will be; and to burn it now is to subtract it from every year that follows. The rent of such a thing must answer, beyond the question every rent answers, of who shall receive it, a question that is peculiarly its own: how to ration a finite hoard across an endless future.
The first to see how a market answers that question was Harold Hotelling, in 1931. Consider, he said, the owner of a stock of some exhaustible thing — a field of oil, a vein of copper — deciding how fast to bring it up. He has, at every moment, a choice: to extract a unit now, sell it, and put the proceeds out at interest; or to leave it in the ground, and sell it later, at whatever the future price may prove to be. He will consent to leave it in the ground only if it gains in value, as it waits, at least as fast as the money would have grown had he sold it and invested — that is, at the rate of interest. From this single observation Hotelling drew the rule that bears his name: that in a well-ordered market the resource rent — the price of the thing minus the cost of getting it out, the worth of it as it lies untouched in the ground — must rise over time at the rate of interest. The resource in the ground is an asset like any other, a bond written by nature; and like any asset it must yield its holder the going return, or be sold. The rent of the exhaustible resource is thus the value of leaving it unused — the "user cost," the charge the present extraction lays against the future's claim — and it mounts, year upon year, as the stock runs down toward its end.
The resource in the ground is an asset like any other, a bond written by nature; and like any asset it must yield its holder the going return, or be sold.
And here the resource rent takes its place in the volume's long argument. For it is the scarcity rent of the third plate — the surplus that accrues to a factor fixed in supply — but lifted out of the still world and set moving through time. The land's scarcity rent measured the fixity of the supply at any one moment; the resource's measures the fixity of the supply across every moment, the finiteness of the whole stock there will ever be. It is, in the most exact sense, the price of the resource's exhaustibility: were the thing inexhaustible, infinitely abundant, the rent would be nothing at all, and its price would fall to the bare cost of extraction; it is only because the stock is finite, and every unit used a unit gone for good, that the resource commands, above the cost of getting it out, any rent whatever. The resource rent is what scarcity itself is worth, when the scarcity is not of space but of time — the cash value, set today, of the plain and unalterable fact that the earth will not be making any more.
Whose, then, is this value, and did the owner make it? Here the volume's question returns, with its familiar answer and one unfamiliar wrinkle. The scarcity value of the resource — the rent proper, the worth of the oil as it lies in the ground — the owner did not create in the least; it is the gift of a nature that laid the oil down across ages beyond imagining, and the owner has done no more than hold the title to the ground above it. In this the resource rent is the unearned increment of the fifth plate over again, a value nature made and an owner captures. And yet the owner is not, here, wholly idle, as the pure landlord was. For someone must find the resource, by the costly and uncertain labour of exploration that comes up dry far oftener than rich; someone must judge when to bring it up, performing the patient intertemporal husbandry that Hotelling described; and someone must bear the risk of a price that may collapse before the stock is sold. These are real functions and real hazards, and the return to them is earned. So the resource rent divides, more plainly than most, into two parts: the scarcity value of the stock itself, which is nature's unearned gift, and the reward for finding it, timing it, and risking it, which is the extractor's earned wage. The rent of the resource is unearned at its core and earned at its edges — the bare scarcity a gift, the labour around it a wage.
But the resource rent raises a question no rent before it has raised, and it is the deepest the plate must face. Because the stock is finite and every use of it final, to extract the resource now is to deny it to all who come after; and so the resource rent is, in a way the other rents never were, a transaction between the present and the future — a price the present sets upon consuming an inheritance the future can never recover. What, then, does the present owe the future, living as it does by drawing down a store that cannot be remade? The most influential answer is the rule that bears Hartwick's name: that a people living off an exhaustible resource can sustain its wealth across the generations only if it does not consume the resource rents but invests them — converting the vanishing natural capital into reproducible capital, the oil beneath the sand into roads and schools and machines and skills, so that when the resource itself is gone its value remains, transmuted into wealth that endures. To eat the resource rents is to eat the future's inheritance; to invest them is to keep faith with it. And the failure to keep that faith has a name and a sorry history: the resource curse, whereby the nations richest in the earth's gifts grow somehow poorest in the using — their rents devoured, or stolen, or squandered, their other industries withered by the very windfall, their politics rotted by the scramble for the spoils that the plate before would know at a glance for rent-seeking, come now to the oilfield.
To eat the resource rents is to eat the future's inheritance; to invest them is to keep faith with it.
And now the scruple that unsettles the whole elegant structure. For Hotelling's rule, beautiful as it is, has fared poorly against the facts. The real prices of the great exhaustible resources have not climbed smoothly at the rate of interest, as the rule foretells; they have lurched and crashed and, across long stretches, actually fallen — copper and oil and coal cheaper, in real terms, over decades in which they were forever said to be running out. The reason is that the "fixed stock" on which the whole theory rests is not, in practice, fixed at all. New deposits are perpetually being discovered, so that the known reserves of many resources have grown, not shrunk, even as we burned through them; the cost of extraction has fallen as the techniques improved, bringing once-unreachable stocks within reach; and the demand has been blunted, again and again, by efficiency and by substitutes, so that the day of exhaustion recedes faster than our using brings it on. The famous wager between the economist who bet that resource prices would fall and the biologist who bet that they would rise was won, and handsomely, by the economist. None of this proves the resources infinite, nor that no reckoning ever comes; it shows that the effective scarcity of a resource — the very thing its rent is meant to measure — depends not on the brute size of the stock but on discovery and invention and substitution, which have, so far, run out ahead of depletion. The fixity at the root of the resource rent is real in the geological long run and curiously elastic in the economic medium one; and the rent that rests upon it is, in consequence, far less predictable than Hotelling's lovely rule would ask us to believe.
Return, then, a last time before the volume's end, to its question. The resource rent is the volume's scarcity rent in its deepest form — the worth of a fixity not of space but of time, the cash value today of the earth's refusal to make any more. Like the rent of land, it is at its core unearned, the gift of a nature that made the oil and the ore long before any owner held a title to the ground; like no rent before it, it carries a debt to the future, for every unit of the finite stock used now is a unit denied to all the years to come. The present that lives by it keeps faith with the future only by investing what it draws, transmuting the vanishing gift into enduring wealth — and breaks that faith, as too many have, by consuming or squandering or fighting over the rents until the gift is gone and nothing stands where it was. And yet even the fixity on which the rent depends has proved, against every prophecy, elastic: discovery and invention have so far outrun depletion, the prices have fallen where the theory swore they must rise, and the day of reckoning, though it cannot be abolished, keeps on being deferred. The rent of the resource is thus the strangest in the volume — unearned and yet partly earned, real and yet resting on a scarcity that will not hold still, a price upon the present's use of the past's inheritance and the future's loss. Whether it is the just reward of finding and husbanding a finite thing, or the unearned capture of a gift the owner did nothing to deserve and a quiet theft from those not yet born to object — and it is, in sober truth, something of all of these at once — is the question, asked now of the wealth the earth will not replace. As the table says of every price within it, the argument remains open.