Abstract
As Ricardo observed, mines vary in quality, and this variation gives rise to a rent. Even within a mine, units of ore vary significantly in quality, and the mining engineer must determine a cut-off grade. The implications for optimal extraction (in the Rawls-Solow sense) are analyzed in a two-sector model with a resource for which an irrevocable cut-off grade decision must be made in each time period. The grade configuration of the orebody is found to have important implications for the allocation of factors between sectors. The Hotelling rule is modified in relation to an alternative definition of social optimum. Harwick's rule is also found to apply.
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