Applied Welfare Indicators and the Economics of Exhaustible Resources
In the past, many economists writing on the subject of exhaustible resources have utilized the concept of consumer surplus as the benefit function to be evaluated [e.g. Hotelling, 1931; Manne]. Unfortunately, as is well-known, this measure, first proposed by Dupuit in 1844, is fraught with difficulties. However, many economists have doggedly refused to abandon consumer surplus procedures, largely on the grounds that no suitable alternative exists. Fortunately, this is no longer the case. In this paper, I propose to develop a simple computational procedure for accurately approximating welfare variations. The method represents an extension of the procedures discussed by Pearce and myself [1976, 1982a].
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