ABSTRACT
In analyzing non-renewable resource prices, Nordhaus (1973, p. 531) ‘distinguish[ed] between extraction costs, the vector z(t), or the marginal cost per unit of output excluding rents and royalties; and royalties, the vector y(t), which are a reflection of the presumed scarcity of a particular resource’. From 1600, there were data on pithead prices, which act as an indicator of the extraction costs (see Figure 2). The trend was generally flat (in the $20-$30 per tonne of oil equivalent range) from the seventeenth to the end of the nineteenth century, which is impressive given that coal mines had to be dug deeper to meet rapidly growing demands. In fact, there were declines in extraction costs in the second half of the seventeenth and of the eighteenth centuries – although prices gravitated back to the $20-$30 range. The latter period probably reflected the ability to use early steam engines to pump water out of the deeper mines. Thus, for 300 years, the greater difficulties of extraction were balanced-out by improvements in technical ingenuity.
