ABSTRACT
It appears that questions in this area are hard to answer. For even in the simplest o f environments where it is supposed that there is perfect foresight, one is concerned not merely with the optimal depletion o f exhaustible resources but with the optimal rate o f investment as well. The two must plainly be interrelated. The latter problem on its own is hard, and the combined problem is very complex. In fact it will appear in the course of the arguments that follow that intuition is not a very good guide for this joint problem. In any case, the assumption o f perfect foresight is particularly dubious here since it would appear almost immediate that an investigation o f intertemporal plans in the presence o f exhaustible resources readily invites consideration o f the possibilities o f large-scale alterations in technology at dates in the future that are inherently uncertain. Moreover, it is clear that such extensive technological changes would not be achievable costlessly. In this paper, therefore, we attempt to demonstrate how one might, in a relatively simple manner, bring such considerations as these to bear on a set o f questions that have generated a considerable amount o f interest in recent years. 0.2. It is plain o f course that the mere existence o f a resource that is exhaustible is not a
1 First version received April 1973; final version accepted February 1974 (Eds.). 2 Among the many to whom acknowledgement is due for their comments we would like to mention
Christopher Bliss, Steve Glaister, Terence Gorman, Frank Hahn, Tjalling Koopmans, Bill Nordhaus, Robert Solow, Joseph Stiglitz, Niel Vousden and, in particular, Harl Ryder.
