As some growing scarcities have begun to alarm the public, the pricing of exhaustible resources has claimed increased attention. Thus, it seems appropriate to consider the issue here even though it represents something of a digression from the main line of our discussion. Here, again, optimality of pricing is defined in terms of resource allocation, but in this case the central issue is allocation among time periods rather than output categories. The results we will describe are all based largely on standard propositions of capital theory going back to the work of Irving Fisher and Bohm-Bawerk.

Yet when applied to exhaustible resources, some of our conclusions may be slightly surprising. For example, our instincts are likely to suggest that items in danger of depletion should tend to rise in price with the passage of time. We will see, however, that this is by no means generally true, and that, in some cases, optimality requires prices that decline, not only in discounted present value, but in current terms as well. Moreover, we will find that, although an optimal policy may call for prevention of the depletion of certain types of exhaustible resources, in other cases we should encourage their current utilization; obviously, this will be true of an item whose early use makes it possible to preserve some other resource whose returns to the future are larger. Clearly, in dealing with the allocation of resources over time, the issue of intergenerational equity arises unavoidably.