Journal Article Population Growth and Oil Resources Get access M. A. Adelman M. A. Adelman Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 89, Issue 2, May 1975, Pages 271–275, https://doi.org/10.2307/1884431 Published: 01 May 1975

I. Introduction, 16. — II. “Administered prices,” 18. — III. The problem in steel, 20. — IV. Interdependence of costs and prices, 21. — V. Price determination in steel, 23. — VI. The crisis of 1959, 29. — VII. Public policy, 35. — Epilogue, 38.

Journal Article Steel, Administered Prices and Inflation: Reply Get access M. A. Adelman M. A. Adelman Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 75, Issue 3, August 1961, Page 500, https://doi.org/10.2307/1885138 Published: 01 August 1961

Journal Article Comment Get access M. A. Adelman M. A. Adelman Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 65, Issue 2, May 1951, Pages 280–283, https://doi.org/10.1093/qje/65.2.280 Published: 01 May 1951

Journal Article Note on Price Discrimination and the A & P Case Get access Rashi Fein Rashi Fein Johns Hopkins University Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 65, Issue 2, May 1951, Pages 271–280, https://doi.org/10.2307/1879538 Published: 01 May 1951

Introduction, 238. — I. Selling Policy, 239. — II. Integration, 244. — III. Buying Policy, 247. — IV. Conclusions, 255.

Journal Article “Equilibrium in Multi-Process Industries” — Further Comments Get access M. A. Adelman M. A. Adelman Washington, D. C. Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 60, Issue 3, May 1946, Pages 464–468, https://doi.org/10.2307/1880683 Published: 01 May 1946

Two implications of received theory are (1) mineral net prices rise at the riskless interest rate, and (2) in-ground value is equal to the current net price. Both propositions are false. A correct theory has been joined to mistaken premises. Mineral resources are inexhaustible. The economic problem is not the intertemporal allocation of a stock but coping with the cost of a flow of reserve accretions. Mineral scarcity and price are the uncertain fluctuating result of a tug-of-war between diminishing returns versus increasing knowledge. Hence minerals are risky assets. Development cost, finding cost, and user cost (the penalty for development/production today instead of tomorrow) are all substitutes. Hence change in any one is a proxy for change in any other. Development cost is observable, and has been stable in many countries for pro- longed periods. User cost was also stable in the USA. There is no sign of any pattern of gradual depletion and rising cost. A simple model of an individual reservoir explains observed relations of value and price. The rate of interest has both a positive and negative effect upon the rate of reservoir depletion. The net effect of a change is therefore weak. Expropriation of low-cost oil fields, had they been operated independently to maximize value, would have led to drastic increases in depletion rates. The fact of decrease proves collusive restriction of output to maintain prices.

The current (Summer 1985) world oil price, and changes since 1973, cannot possibly be explained by scarcity, or by changes in scarcity. The level and dispersion of marginal costs, and the pattern of investment behavior since 1973, prove that supply is being restricted to maintain the price, which can be maintained so long as the low-cost oil is dammed up. If the dam breaks, so will the Statement of the Problem M X ANY public and private investment decisions, affecting a significant fraction of world income, depend on the expected price of crude oil. Since the price explosion of 1973, and especially since the second explosion of 1979, there has been a wide consensus: Oil has become, and will continue to be, in increasingly short supply for the rest of the century. Further price increases are necessary and inevitable. We need cite only a fraction of even the post1978 predictions of rising oil prices, which were and are used as a basis for private and public investment, and taxation. (U.S. CIA, 1979, p. iii; Fesharaki, 1980; U.S. Senate, 1982; OGJ, 1982, pp. 118, 210; OGJ, 1984a, p. 32; Canada, 1980, 1981a, 1981b.) The price decline since 1980-81 has not weakened the consensus, but has lowered the rate of expected increase. Prices are expected to be weak or stable for a few years, then begin the inexorable increase. (EMF 6, 1982; US. GAO, 1983; World Bank, 1983, p. 28; and 1985, pp. 37-38; New York Times, 1984; DOE, 1985; Erickson, 1985; Saunders, 1984.) The oil-company acquisitions of 1983-84 were obviously based on the consensus view. An expert panel convened by the CIA in April 1985, like one convened by the California Energy Commission, expected that prices would rise, at an increasing rate, starting around 1990. (Wall Street Journal, 1985; California, 1985.) The International Energy Workshop of the International Institute of Applied Systems Analysts compiled a consensus forecast in December 1981, July 1983, and July 1985. The first consensus was that the price would nearly equal $60 in 1990; the most recent has it approaching that number only by 2010. A twenty-year postponement is no small change, of course. But in each case, the consensus was that the current price of oil was approximately equal to, or mildly above, the scarcitydetermined price. In the long run, it would have to rise above the current level. (Manne and Nordhaus, 1985; it should not be assumed that they themselves share the consensus, or that they do not.) The Economic Theory of the Consensus In general, absent monopoly restriction of output, a rising price registers increasing scarcity as consumption puts increasing strain upon productive resources. Some formal oil price models are explicitly competitive. (Mead, 1979, 1985; Cremer and Salehi-Isfahani, 1980; MacAvoy, 1982; Roumasset et al., 1983). More often, competition is an implicit major premise. Prices are said to reflect not monopoly but forces or deeper forces. Or it is said that if the cartel of producing nations (not the unimportant organization OPEC) disappeared, oil prices would not be strikingly different from what they are. Or that discoveries had been shrinking, and demand increasing up to 1973, hence prices had to rise, so at most the cartel pushed them up a bit faster. Other models are non-committal, but implicitly competitive, in that they have price driven by total consumption pressing against reserves. Figure 2 does not, of course, disprove this proposition but it does suggest that if scarcity pushed up prices, scarcity must have been very sudden and strong. There have also been attempts to model the oil market as a monopoly, in the generic sense: a few Received for publication June 24, 1985. Revision accepted for publication November 19, 1985. * Massachusetts Institute of Technology. The research for this paper has been supported by the National Science Foundation, grant SES-8412971, and by the Center for Energy Policy Research of the M.I.T. Energy Laboratory. I am obliged to Michael C. Lynch for valuable assistance. For many helpful comments and criticisms, I am indebted to Paul G. Bradley, Harry G. Broadman, Richard L. Gordon, William W. Hogan, Gordon M. Kaufman, Stephen Martin, James W. McKie, Joe Roeber, James L. Smith, G. Campbell Watkins, and to two anonymous referees. But any opinions, findings, conclusions or recommendations expressed herein are those of the author, and do not necessarily reflect the views of the NSF or any other person or group. Copyright ? 1986 [ 387 ] This content downloaded from 157.55.39.17 on Wed, 31 Aug 2016 04:37:42 UTC All use subject to http://about.jstor.org/terms 388 THE REVIEW OF ECONOMICS AND STATISTICS sellers restraining output and raising prices. (For an excellent survey, see Gately (1984).) But these models are also based on rising scarcity. They aim to show the difference between the competitive response and the monopoly response. Perhaps, given the increasing scarcity inherent in an exhaustible natural resource... there is a very limited scope for the monopolist ... indeed, under the natural 'first approximation' of constant elasticity demand schedules, with zero extraction costs, monopoly prices and competitive equilibrium prices will in fact be identical (Stiglitz,