Depreciation, Replacement costs, Asset valuation

[An economic framework is presented for measurement of the net social benefits that can be attributed to development of a new outdoor recreation site, taking into consideration the influence that existing recreation developments have on the demand for services from the newly developed site. Methods are given for statistically estimating the empirical measures needed to apply the model, and an application is made to water-oriented outdoor recreation in Missouri. Results of the application suggest that investments in outdoor recreation can be evaluated under an objective economic decision criterion.]

Vernon Smith, in his recent article in this Review [7], attempts to provide . . . a unified theory of production from natural resources encompassing production from exhaustible, as well as replenishable, resources. There is some question, however, as to the general applicability of Smith's model with reference to the optimum rate of production from exhaustible' resources, and therefore to his description of the optimum rate of investment in these industries. The purpose of this paper then is twofold: first, to discuss the rather limited nature of Smith's results concerning production and investment within the context of exhaustible resources; and secondly, to present a model that retains Smith's emphasis on the interrelationship of capital and resource extraction, but one that conforms to the established theory concerning the economics of exhaustible resources. The model presented in this paper, however, focuses on the individual firm as opposed to the industry model presented by Smith.