ABSTRACT
This chapter is concerned with both of these aspects of the economics of non-renewable natural resources. It shows that the role of natural resources in the economy does lead to alterations in the conventional, Keynesian, policy prescriptions for unemployment. In particular, the explicit assumption is made that the asset market is in equilibrium so that the return on holding stocks of natural resources is equal to the rate of return on other assets. The linkage between the natural resource market and the asset market could be the cause of a knife-edge instability. With perfectly competitive markets the authors should expect the price of the flow of resources to equal the price of the stock of resources. If the final effect on the interest rate is downwards then there is even stronger stimulus to hold stocks of resources, and the disequilibrium is exacerbated —hence the knife-edge. The chapter also presents an overview on the key concepts discussed in this book.
