Notes on the Classical Theory of Normal Prices: Exhaustible Natural Resources and Numéraire Dependence

CSWP 41 (May 2020)

Author Sergio Parrinello

Keywords classical theory; Sraffian approach; exhaustible natural resources; numéraire dependency; price normalization.

JEL B51; D57; Q32.

The present paper contains two notes. The first one resumes and expands the classical approach to cope with the existence of exhaustible natural resources in the context of the theory of normal prices. Alternative closures of the model are envisaged: either a given supply of the resource or a given royalty. The fixed-supply alternative, suggested in (Parrinello 2004), rests on the method used in (Sraffa 1960) to deal with the case of intensive land cultivation. The fixed-royalty assumption reflects the position of Piccioni and Ravagnani (2002) and Ravagnani (2006) about the theory of absolute rent. The second note addresses  the problem of numéraire dependence, which has been stressed as  a criticism of models of general equilibrium without overall perfect competition, and argues that such a property  may concern also the theory of normal prices with exhaustible natural resources. It is suggested  that a way out from the impasse of the numéraire dependence should be found in an extension of the theory of normal prices to a monetary economy.

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