Resource Sector in an Open Economy

the economics of exhaustible "e; assets presents a whole forest of intriguing problems."e; 1 Harald Hotelling ) The two energy price shocks in 1973/74 and 1979/80 have arosed interest in the new area of resource economics. The affluent societies of Europe, North America and Japan were confronted with the new scarcity paradigm of the "e;space ship earth"e; with only a limited supply of natural resources aboard whereas population is growing and the environment can- not accomodate the increasing volume of pollutants. The problem of natural resource scarcity gives rise to the question how resource-dependent economies like European coun- tries and Japan are affected by an increase in resource prices and how they can adjust to rising energy prices. The new para- digm also has focused new interest on the problem of the re- source-extracting firm and of the resource-exporting country. The Hotelling revival of resource economics has given new im- portance to the behavior and to the policy issues of resource- exporting countries.