Comparing Nonrenewable Resources Stocks and Capital Goods

Abstract

Abstract This chapter shows that from a social welfare perspective non-renewable natural resource stocks are not like capital goods in capital-resource economies. We use shadow pricing for comparing non-renewable natural resource stocks and capital goods. It is shown that from a social welfare perspective, there are situations where the social worth of non-renewable natural resource stocks is greater than the social worth of capital goods. More generally, nonrenewable natural resource stocks are not equivalent to capital goods from a social welfare perspective. Numerical examples on shadow pricing are provided for illustration. Shadow pricing metric and the market pricing metric do not lead to the same conclusion when it comes to comparing natural resource stocks and capital goods. We contribute to the literature that emphasizes the importance of incorporating information on natural resource stocks in optimally managing a country’s public wealth. Public policy recommendations relating to the optimal management of natural resource stocks in Cameroon are discussed.