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Government vs. Resourceship (Bureaucrat vs. Entrepreneur in the quest for mineral wealth)

By John Brätland -- April 6, 2011

[Editor note: The original title of the post of Dr. Brätland (bio at end) was “Institutions and Policies that Impede Capital Maintenance for Extractive Firms.” Resourceship is a term used by the late economist Stephen McDonald (1924–2006) to describe entrepreneurship applied to mineral resources.

Dr. Brätland’s post below complements a series of entries at MasterResource under the terms resourceship, peak oil (fixity-depletion), and ultimate resource, as well as subsoil privatization.]

Although capital maintenance by extractive firms refutes the exhaustion myth of minerals, this refutation hinges on access to lands, entrepreneurial latitude in managing resources, and secure private-property rights.

In particular, certain institutions of governmental control and jurisprudence hinder entrepreneurial actions of extractive firms striving to maintain capital (defined as the asset value of to-be-extracted minerals).

These hindrances include:

(a) Foreclosure of land access by government ownership of mineral lands;

(b) Foreclosure of entrepreneurial latitude by court imposed covenants enforcing obligations to surface owners; and

(c) In the case of petroleum, the extractive firm’s inability to acquire full control and ownership of reservoirs it has discovered.