Question

What is meant by the Hartwick Rule? Construct a real-world example that would illustrate this concept.

  1. What is meant by the Hartwick Rule? Construct a real-world example that would illustrate this concept.

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Answer #1

Hartwick rule defines the amount of investment in produced capital (Building,roads , knowledge stock etc) that is needed to exactly offset declining stocks of Non- renewable resources.

Example- invest resources rent requires that a nation invest all rent earned from exhaustible resources currently extracted where rent is defined along path that maximize returns to owner of the resources stock.the rule extend to the case of many type of capital good including a vector of stocks of natural capital

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