Robert D. Cairns

Competition and regulation in the taxi industry

Abstract A simple model of the taxi industry suggests that deregulation of fares and entry may not be optimal. the conditions of competition do not hold in the industry, even approximately. A model of search, where drivers and riders search for each other, is presented for the cruising-taxi market. This indicates that equilibrium of a deregulated industry does not exist. Price regulation is essential, and entry regulation may be useful. In addition, viewing the medallion as a bond for appropriate performance provides another possible rationale for regulation.

Maximin: a direct approach to sustainability

We solve directly a general maximin (sustainment, intergenerational-equity) problem. Because the shadow values of a maximin problem do not correspond to the shadow values from a general discounted-utility solution, they correspond to the prices of only a very special competitive economy. Virtual discount factors for the economy arise. They do not correspond to hyperbolic discount factors. Hartwicks rule is derived and generalized naturally to take into account non-autonomous and non-deterministic features of the economy. Under uncertainty, Hartwicks rule is the analytic expression of a form of precautionary principle. Hotellings rule is a necessary condition, but may be more complex than has been appreciated in simple models. Some interpretations of strong sustainment are special cases of weak sustainment but, paradoxically, may be more difficult to solve.

On Using Current Information To Value Hard-Rock Mineral Properties

We reformulate the Hotelling valuation principle to take into account the special production characteristics of hard-rock minerals. The data requirements of the revised model are still parsimonious, but the resultant valuations are some 40 below those produced by the Hotelling valuation principle. Our valuation equations are also user-friendly, allowing the valuer to specify price and cost expectations that need not comply with the Hotelling rule. Empirically, our model provides estimates of market value for producing mineral properties that are more accurate than those produced by the Hotelling valuation principle.

Dynamic rent seeking

Abstract A dynamic model of the political process is presented under conditions of uncertainty. As in an earlier model by Becker, several interest groups vie for political influence, exerted in the form of taxes and subsidies. Some results of the static, single-interest-group theory of rent seeking are given slightly modified interpretations. Among other things, it is shown that a groups rent- seeking activity is negatively related to the rate of growth of national income, to the groups relative position in the income distribution, and to measures of how ‘deserving’ it is. The importance of voting is modelled explicitly. It is also found that policies tend to be adopted which minimize the deadweight welfare losses from rent seeking.

Sustainability accounting and green accounting

Theoretical issues arising in maximin and utilitarian programs are considered in order to shed light on the merits of various concepts of income and types of environmental accounting as guides for environmental policy. The accounting prices for sustaining an economy obey Hartwicks rule but are inconsistent with the principles of national accounting. Moreover, they would be formidably difficult to calculate. Green net national product is an approximate index of welfare in a utilitarian economy which maximises future discounted utility flows. These conclusions hold even if underlying conditions are non-autonomous.JEL Codes: Q3, E2

Sectoral Supply of Minerals of Varying Quality

In this sectoral model of mineral production, investment in ca pacityand variation in ore-body grade and volume help explain some stylizedfac ts. More than one grade of ore may be exploited simultaneously. Mine exhaustion, but not necessarily entry, occurs in declining orderof grade. The price may ri se or fall but is likely to fall initiallyand must eventually rise, at less tha n the interest rate unless demand expands rapidly. These trends exhibit fluctuat ions due to entry and exhaustion of deposits. Resource price cyclicality is rein forced because mines keep producing at capacity when the price is falling. Copyright 1986 by The editors of the Scandinavian Journal of Economics.

A model of exhaustible resource exploitation with ricardian rent

Abstract The question of the optimal rate of development of an exhaustible resource (such as a mine) has long been a concern of resource economists. However, with few exceptions in the literature, it has been implicitly assumed that orebodies are of uniform quality, readily distinguished from their surroundings, or else that the mining firm is able to choose the order of mining from sections of the mine which may vary in quality (e.g., grade of ore). While such simplifying assumptions have led to a rich array of conclusions, they stand in contrast to the varying conditions facing the mining engineer in making cut-off grade decisions. This paper models a situation where, because of orebody configurations, the firm cannot choose to mine in order of grade. An optimal cut-off grade is obtained for each point of time of the mines life in the case of a socially optimizing firm. Then in a special case the effects of monopoly and various types of mineral taxation are considered for the cut-off grade decision and for ultimate recovery.

Strike When the Force Is with You: Optimal Stopping with Application to Resource Equilibria

Optimal investment in a nonrenewable resource project occurs when the rate of increase of the projects forward value falls to the force of interest. This stopping rule yields a financial interpretation of resource quality as being a property of the project rather than of individual units of reserves. It also leads to re-interpretations of (a) rent as the present value of the project rather than of units of reserves and (b) Hotellings insight as, not a rule for the path of rents, but an equilibrium algorithm for price. The analysis is extended to sequential development of pesticides, antibiotics, and forests.

Seeing the trees as a forest: what counts in green accounting

Applying ‘green’ accounting to value the commercial contribution and depletion of a forest is only a short-run variation of the traditional approach to net national product (NNP) and arguably provides less information. Green adjustments can make a vital difference, however, by introducing nonmarketed values. Since optimal NNP is the linearized Hamiltonian, values are taken at the margin and exclude consumers’ surpluses, unlike in cost‐benefit analysis. Green NNP may also require imputation of unmarketed exports and imports.

The microeconomics of mineral extraction under capacity constraints

The mineral investment decision under certainty is discussed in the context of broad microeconomic features of the industry, the central one being that production is constrained by capacity. The assumptions of the economic literature on natural resources are evaluated in the context of these features and the assumptions that permit the modeling of such facts are examined. Several characteristics of extraction and equilibrium, and some implications of uncertainty, are considered.