What is Resource Rent?
The aspect of resource rent has been trending in the recent past and can be observed from diverse perspectives. Economically, the term rent refers to the residual value that remains after all the expenses are accounted for, and results obtained. Ideally, economic rent is often used to refer to the surplus value but when natural resources such as valuable minerals and coastal space are involved then it is known as resource rent. Historically, the process of identifying, measuring and collecting resource rent is very complicated and do not involve straightforward process (Thampapillai, D. J., Hansen & Bolat 2014). The collection and use of this kind of rent varies from one country to another and highly depend on prevailing market conditions and accessibility of vital information regarding resource rent. In addition, technology and property rights also play a role in facilitating access and governing the use of such rent (Hall & Klitgaard, 2012). Countries that are rich in minerals have sought to earn huge amount of revenue through the taxation of resource rent. Countries like the Democratic Republic of Congo that is rich in minerals provides a basis on how resource rent could be used to end poor economic growth using abundance of resources (Matti, 2010).
Resource rent provides another alternative to eradicate poverty in a given country and put into proper use the minerals and resources that can serve to meet other needs of the citizens. Despite the abundance of natural resources, developing countries are unable to utilize these resources to provide cheaper and alternative means of energy that is environmentally friendly. Resource rent provides the state with revenues that can aid infrastructural development, provision of better healthcare facilities and security (Matti, 2010). It is significant to evaluate the revenues and invest them in income generating activities to ensure a constant flow of income (Thampapillai, D. J., Hansen & Bolat, 2014). In conclusion, there is a need to ensure that resource rent is put into proper use because, despite availability of such revenues, different countries continue to remain impoverished and to experience a decline in the economy.
What is horizontal integration? How did Standard Oil accomplish it?
Horizontal integration refers to the merger of companies that are in the same production stage in different or the same industries. It is worth noting that horizontal integration that occur when the products of the company are similar is a merger that is formed by competitors. On the same note, it becomes a monopoly when the producers of services and good in the market merge. Horizontal integration refers to a strategy in that company that have enjoyed a certain success use to increase profits and expand (Jones & Hill, 2012). Horizontal integration call for less initial capital-output in the marketplace. In fact, horizontal integration is a critical mechanism that companies acquire or create the production units for output that are similar (Hall & Klitgaard, 2012). Companies focusing on horizontal integration tend to benefits because they achieve economies of scope and economies of scale. Horizontal integration means a strong presence of a company in the marketplace.
The Standard Oil dominates the oil industry and oil products market for many decades due to horizontal integration. These were achieved by focusing on the refining sector in the oil industry. The company merged with various companies that carried out the same production process. In fact, Standard Oil acquired 40 refineries, which made it stronger and successful. Through acquisition of refiners, Standard Oil enjoyed increased market power (Washick & Fisher, 2005). The company accomplished horizontal integration by acquiring and merging with many refineries. The company acquired the production units for output that are similar. As the company progressed, affiliate companies were merged to Standard Oil Trust. The merging later allowed the company to function as a monopoly, win the oil industry
What is Backstop Resources theory?
Backstop resource theory is one of the theories that focus on heavy utilization of resources. The theory asserts that when the limited resources in the economy are utilized the alternative sources of energy tend to become cheap compared to the limited ones. In an economic view, the alternative sources of energy become economically viable. The essence of technology plays a crucial role in this case. Backstop technology help in discovering new alternative sourced of energy based on the fact that backstop resource are unlimited. Backstop technology will be cost effective in the long-run (Tsur & Zemel, 2003). The unlimited resources that are heavily utilized tend to be expensive; hence, the backstop resource come in handy as mechanism of providing affordable alternative energy. Backstop resource theory has formed a platform where nations can find alternative energy, which are economical in nature.
Many countries in the world tend to focus on these theory in its move to provide an alternative source of energy. In the modern society, the issue of resource depletion has become a major problem, however, backstop resource has become a solution to the problem, especially, on issues related to nonrenewable resources. Backstop resource theory is a critical feature in the energy economics since it is associated with cost effeteness. The issue of energy shortage and resource depletion has affected many countries (Homer-Dixon, 1999). Backstop resource theory is a solution to these problems. The technological advancement creates an avenue for nations to create substitute sources of energy. The theory asserts that the presence of backstop resources and technological advancement, the cost of limited resources will decrease. In general analysis, it is evident that the backstop resource is a probable alternative in providing an alternative source of energy. Implementing backstop resources is a platform to provide alternative sources of energy that are cheap. Backstop resource theory tend to create an economical source of alternative energy.
References
Hall, C. A. S., & Klitgaard, K. A. (2012). Energy and the wealth of nations: Understanding the biophysical economy. New York, NY: Springer.
Homer-Dixon, T. F. (1999). Environment, scarcity, and violence. Princeton, N.J: Princeton University Press.
Jones, G & Hill, C. (2012). Strategic Management Theory: An Integrated Approach. London: Wiley
Matti, S. (2010). Resources and Rent Seeking in the Democratic Republic of the Congo. Third World Quarterly, 31(3), 401-413. doi:10.1080/01436597.2010.488471Thampapillai, D. J., Hansen, J., & Bolat, A. (2014). Resource rent taxes and sustainable development: A Mongolian case study. Energy Policy, 71169-179. doi:10.1016/j.enpol.2014.04.011
Tsur, Y., & Zemel, A. (2003). Optimal transition to backstop substitutes for nonrenewable resources. Journal Of Economic Dynamics & Control, 27(4), 551.
Washick, R & Fisher, T. (2005). Managerial Economics: Game Approach Theoretic Approach. New York: Willy
