Economic theory and international trade in natural exhaustible resources (Q1096512)

How should a country use, namely deplete and trade, a natural exhaustible resource it possesses in order to improve its welfare? This is a crucial problem in practical international economics of today; e.g. Norway, Mexico, Nigeria and the Arab Gulf countries and their oil. We can watch (and occasionally feel) how the decision-makers solve this problem regularly. Theoreticians try to help by providing abstract models, analyze them and interpret the results. This is what the book under review does. The models offered are mathematical models, yet well motivated by a variety of possible real situations. The derivations are rigorous and the results formal, yet interpretable in the economic framework. Some attempt (though not extensive) is made to compare the theoretical results with observations from reality. The framework of the analysis is optimization on the one hand, and equilibrium and dynamic equilibrium on the other; namely, a goal is set for the resource holder. The optimization problem is then derived from a given international trading situation and the corresponding equilibrium. Several situations are analyzed in detail; for instance the case of a perfect international market, and the case of a lack of world market for bonds, etc. Each situation is well motivated and the analysis is fairly detailed. The text is preceded by a survey of the economic literature on these problems. An appendix is provided giving some of the mathematical background needed. The mathematics is the standard calculus of variations and optimal control encountered in the economic literature. The presentation of both, the mathematical aspects and the economic interpretations, is very clear. I do not know the extent to which the decision-makers in the aforementioned countries can use the text, but a nice contribution to the theory, it is.