The following is a response to an earlier blog post by Ulrich Bartsch and Donato De Rosa
Although there exists plenty of analysis of the Dutch disease, the resource curse, and Hotelling’s rule
to fill several large libraries, there is nonetheless still ample room for debate about optimal policies in resource-rich countries. What is the optimal pace of extraction? Should they diversify? If so, how should they diversify and when should they diversify? What role should sovereign wealth funds play? Can the destabilizing adjustment process in the wake of an oil price collapse be avoided?
In a recent blog
, Ulrich Bartsch and Donato De Rosa revisit the issue of resource revenue management. There are many good elements in this analysis, but there is one big problem: The same rigor that is used to analyze the goods markets is not used to analyze the accumulation of assets.
While market forces are declared essential in the goods markets, little is said about the role of market forces in the accumulation of assets.
Let’s explore a bit more the relation between market forces, asset accumulation, and comparative advantages.