“Les Économistes et la fin des énergies fossiles (1865-1931)” is a work by Antoine Missemer, from his doctoral thesis in economics. The choice of the corpus is original and provides an opportunity to discuss little-known literature: while Harold Hotelling’s “The Economics of Exhaustible Resources” (1931) is considered by many to be the seminal article on the economics of natural resources, Missemer shows that it is also the end point of a tortuous intellectual journey that began 66 years earlier with Jevons’ essay “The Coal Question” (1865). While some of this research has reached us, others have sometimes been forgotten, and the study of this unrecognized period reflects profound changes in the discipline of economics and in the approach to the problem of the depletion of fossil resources that are worthy of attention. Among external influences, due to the historical context, and internal evolutions, carried by the epistemic upheavals of the economic discipline, Missemer offers us a journey through time that is particularly rich in lessons.
In 1865, the depletion of coal mines threatened to halt England’s growth altogether. Its inexpensive and high-quality domestic coal gives it a competitive advantage over its neighbours in terms of mining and industrial production. As demand grows exponentially, depletion would lead to a collapse in supply and higher prices with disastrous cascading consequences for the industry and for the entire British economy, which is heavily dependent on coal. One of the major contributions is the rebound effect: it is expected that an increase in energy efficiency, by consuming less coal for the same use, will reduce the pressure on fuel reserves. But paradoxically, these efficiency gains can lead to an increase in demand by making new uses profitable. Thus, technical progress is part of the problem of exhaustion, not its solution. In addition to the rebound effect, Jevons’ book provides a rich monographic analysis drawing on both geology and engineering, addressing simultaneously the technical potential of coal as a substitute and the consequences of resource depletion on international trade or on the well-being of future generations. Most importantly, he is the first to pose the problem in truly economic terms. His work will have a strong framing effect on subsequent work, particularly on the American conservationist movement.
Concerned not with relative decline relative to their neighbours, as the British were, American conservationists fear that the depletion of resources will condemn all future generations to a bleak future. They do not, however, call for nature to be preserved for its own sake, nor for any extraction to be prevented, but rather for the public authorities to combat waste in order to slow down the inevitable, and demand that mining rents be invested to compensate future generations (repayment of sovereign debt, investment in education). Although this movement had a strong political echo for two decades, the beginning of the 19th century marked a major turning point. On the one hand, the discovery of new deposits of coal and the arrival of oil tempered the pessimism of the time. On the other hand, the discipline of economics experienced a major epistemic turning point with the arrival of the Austrian theory of capital and the rise of marginalism. Reflection is then redirected towards the determination of the rent: how to remunerate a rare and exhaustible mining resource?
The 1910s were marked by an enthralling intellectual ferment in which everyone tried to integrate exhaustibility into their definition of rent, in order to finally explain how the owner of the subsoil should be remunerated. In addition to the differential share, (1) a fixed rent depending on the power balance between owners and operators, (2) a proportional rent depending on the volume extracted, remunerating the degradation of the subsoil assets, and (3) a fee for the use of the land by the mining machinery. These reflections are abandoned in 1920 with a return to a strict application of the Ricardian differential principle, denying the particular features of mining rent. This step backwards is the result of a desire for generalisation and theoretical unification: economic discipline must be able to treat all objects with the same tools. This turnaround can be explained by the influence of two traditions. First of all, the Austrian controversies around capital, and in particular the work of Böhm-Bawerk considering capital as a detour of production, make time a central issue: capital is a present sacrifice for future gain. Secondly, the very broad British conceptions of capital as wealth (notably by Fisher) allow mining reserves to be treated as a stock of assets, a natural capital that can be mobilised in production and valued solely according to human needs.
The problem is now one of optimal allocation. The operator must arbitrate between (1) extracting as quickly as possible in order to invest the funds and be remunerated through interest rates (as long as the resources are in the ground, his capital does not “work”) and (2) slowing down extraction in order to (a) not waste too many resources (diminishing returns) and (b) wait for mineral prices to rise (increasing scarcity as depletion progresses). If Gray (1913, 1914), Cassel (1914 translated in 1932) and Ive are still influenced by normative elements of conservationism, defending a slowdown, they nevertheless present a model of intertemporal arbitrage seeking to determine the optimal rate of extraction which is very close to that of Hotelling (1931). Rather than a disruption in the object or in the discourse, Hotelling makes a leap in the method by importing his training as a mathematician to the treatment of the problem. This model has exerted a long-lasting influence in the economic thinking of its successors, marking the end of macroscopic and systemic concerns and the shift to a focus on microscopic problems. Following the shift of the field towards microeconomic issues, the reflection on resource depletion abandons the broad ambition of trying to embrace all the dimensions of a well-defined object, in order to apply the tools of the emerging marginalism to it. The question of depletion turns into an optimization problem of the mining rent. This is a far cry from the problem as Jevons posed it in 1865.
This particularly dense and stimulating book is an essential read for the energy or environmental economist seeking to understand the history of his discipline. In pointing out how material conditions and epistemic developments shape our ways of framing problems, Missemer reminds us that theories are always situated. By illuminating economic issues from a particular angle, they necessarily cast some shadows. Therefore, the pluralism of approaches, far from being a scientific weakness, enables us, by crossing views, to escape from one-dimensional perspectives in order to better understand phenomena in their complexity and historical variety. We agree with the author’s conclusion, and close our reading note with his words: “May [economists] be “bold” enough, as Jevons put it, to solve problems as they arise, not as we would like to understand them.”
Jérôme Deyris, Research Fellow “Financial markets in the era of stranded assets”
 Missemer, A. (2017). « Les économistes et la fin des énergies fossiles (1865 – 1931) » Éditions Classiques Garnier, 180p, €