resource economics Natural resource economics deals with the supply, demand, and allocation of the Earth's natural resources. One main objective of natural resource economics is to better understand the role of natural resources in the economy in order to deve ...

, Hartwick's rule defines the amount of investment in produced

capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used fo ...

(buildings, roads, knowledge stocks, etc.) that is needed to exactly offset declining stocks of non-renewable resources. This investment is undertaken so that the standard of living does not fall as society moves into the indefinite future. Solow (1974) shows that, given a degree of substitutability between produced capital and natural resources, one way to design a

sustainable consumption Sustainable consumption (sometimes abbreviated to "SC") is the use of products and services in ways that minimize impacts on the environment in order for human needs to be met in the present but also for future generations. Sustainable consumption ...

program for an economy is to accumulate produced capital sufficiently rapidly so that the pinch from the shrinking exhaustible resource stock is precisely countered by the services from the enlarged produced capital stock. Hartwick's rule – often abbreviated as "invest resource rents" – requires that a nation invest all rent earned from exhaustible resources currently extracted, where "rent" is defined along paths that maximize returns to owners of the resource stock. The rule extends to the case of many types of capital goods, including a vector of stocks of

natural capital Natural capital is the world's stock of natural resources, which includes geology, soils, air, water and all living organisms. Some natural capital assets provide people with free goods and services, often called ecosystem services. All of t ...

. The difference between total investment in some kinds of capital and total disinvestment in other types of capital has been labelled " genuine savings". Genuine savings has been estimated for many countries by the

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...

and other authors (Hamilton and Atkinson, 2006, chapter 6). A positive value for a nation's genuine savings has been linked to the possibility of long-run economic

sustainability Specific definitions of sustainability are difficult to agree on and have varied in the literature and over time. The concept of sustainability can be used to guide decisions at the global, national, and individual levels (e.g. sustainable livin ...

References

* * * * * * *{{cite journal , last1=Withagen , first1=Cees , first2=Geir B. , last2=Asheim , year=1998 , title=Characterizing Sustainability: The Converse of Hartwick's Rule , journal=Journal of Economic Dynamics and Control , volume=23 , issue=1 , pages=159–65 , doi= 10.1016/s0165-1889(97)00109-7 Resource economics Non-renewable resources