In Part 1 of our Hotelling's Rule explanation, we laid out the basic economic observation that for a non-renewable, exhaustible resource with completely known stock, no discoveries possible, no alternatives, no recycling, private ownership and constant costs of extraction, the price of the resource will increase at the interest rate over time. Whew, that was a mouthful.
At the end of that post, we observed that real word graphs of prices for some (and this really holds for most) depletable resources seem to look nothing like the ever-increasing Hotelling price path--even over very long periods of time.
Was Hotelling wrong?
Is our explanation of Hotelling's Rule wrong?