Sufficient Conditions for Extracting Least Cost Resource First
Abstract
Kemp and Long demonstrated that it may be preferable to exploit high and low cost
resource deposits simultaneously and not in sequence as is typically assumed in the
resources literature. They show that it is desirable to delay extraction from low
cost pools in order to smooth consumption over time, if the resource in the ground
is society's only store of wealth. This paper considers a model in which extracted
resources can be converted into capital which may either be consumed or stored to
provide for consumption later on. We find that a sufficient condition for the strict
sequencing of extraction to be optimal is that stored capital be productive so that
it can be used to produce additional capital.
Type
Journal articleSubject
extracting resourcesPermalink
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Tracy R. Lewis
Walter M. Upchurch, Jr. Distinguished Professor of Business Administration
Tracy Lewis is Professor of Economics at the Fuqua School of Business at Duke University,
where he holds the Black Chair in Economics. Professor Lewis founded the Innovation
Center at the University. Prior to joining the Duke University Faculty in 2003, he
served on the faculties at the University of Florida, at the California Institute
of Technology, the University of British Columbia, and the University of California,
Davis. Aside from academic employment, he has also held positions at the Fed

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