Resource Exhaustibility: A Mythology Refuted in Entrepreneurial Capital Maintenance by John Brätland (Department of the Interior)
Contrary to myth, extractive resources are replaceable capital goods in the context of entrepreneurial plans to maintain capital. The existence of extractive-resources has no economic significance outside of this context. Aggregate resource stocks have no bearing on human action. The exhaustion myth ignores entrepreneurial action and reflects preoccupation with global exhaustion and presumed ‘un-replaceability.’ But entrepreneurial capital maintenance refutes this myth. Capital is the entrepreneur’s net capitalized appraisement of ‘entrepreneurial rents’ obtainable through strategic investments in capital goods. Hotelling rents are subsumed in entrepreneurial rents. As extraction costs increase from site-specific depletion, entrepreneurial firms strategically maintain capital by choosing the scale, timing and location of investments in exploration, development and other means to resource replacement. But capital maintenance is not necessarily limited to physical replacement of depleting capital goods and cannot be limited to exploration and development. A final section examines existing institutions that impede this capital-maintenance process.
