Minerals are a shared inheritance: Accounting for the resource curse

Basu, Rahul and Pegg, Scott (2020): Minerals are a shared inheritance: Accounting for the resource curse.

Abstract

Many countries badly mismanage their natural resource endowments. We argue that a fundamental change in paradigm is needed. Specifically, we advocate treating non-renewable natural resources as a finite shared inheritance asset, and extraction as the sale of the inherited wealth. We identify several proposals that logically derive from treating natural resource proceeds as sales of a finite intergenerational inheritance rather than as revenues that can be spent. Such proposals suggest that mineral owners must strive for zero-loss when selling minerals, establish a passively invested future generations fund from the proceeds and distribute dividends from that fund to citizens as the rightful owners of the shared inheritance. The current dominant metaphor of proceeds from the exploitation of non-renewable mineral resources as being “windfall revenues” is underpinned by government accounting standards. The “windfall revenue” metaphor is not only inaccurate but also produces several pernicious effects that help explain the poor management of natural resource endowments in so many countries. We do not anticipate that our ideas will quickly overturn decades of established practice. We do, however, believe that the case needs to be made.

• Item Type: MPRA Paper
• Language: English
• Keywords: resource curse; government accounting standards; inter-generational equity; public sector net worth; shared inheritance
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional ; Evolutionary; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; G - Financial Economics > G0 - General > G02 - Behavioral Finance: Underlying Principles; G - Financial Economics > G1 - General Financial Markets; H - Public Economics > H2 - Taxation, Subsidies, and Revenue; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents; H - Public Economics > H4 - Publicly Provided Goods; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; H - Public Economics > H6 - National Budget, Deficit, and Debt; H - Public Economics > H8 - Miscellaneous Issues > H82 - Governmental Property; K - Law and Economics > K0 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology

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