Post by Gunnar Eskeland

Thanks, Mogstad, for lifting an undervalued message from Economics: There are four principal messages around an oil find, and number 4 is a sin of omission in our profession: iv) The oil wealth may - and should - largely land on government laps. Since taxation generally is costly, these returns should be used in part to reduce taxes on labor and capital, thus releasing efficiency gains. Leaky buckets are otherwise carried back and forth. Hopelessly wasteful. The three others are: i) as a wealth gift, an exhaustible resource can be harvested and transformed into a generational gift, as in NBIM. Be watchful: living ones are voting. ii) as the returns are to be spent, perhaps services shall expand, tradeables production contract (V. Norman, W. Baumol); iii) if the find is a greasy one - polluting for instance - you'll try to clean it or end it quickly (Pigou's point about emission taxes, IPCCs on global and intergenerational public goods). A fifth, perhaps, is more like an observation than a principle: The 'resource curse' (shaky, but: Jeff Sachs, inter alia) points out that finding oil often looks like it does more harm than good: As if it results more in corruption and races between thugs, to grab a share, than it does to raise living standards. Perhaps government gets less attentive if it does not need to cultivate a tax base and inspire workers and investors. Norway has not - or has much less - walked into this trap. For our generation, it has been a fantastic ride. But that is to hold us to a very low bar. It is a lot of money. For UK, for instance, about the same amount of petroleum, but much less per capita. 🤠