1 66 The Political Economy of Resource Use 



there are any public interest advantages in providing differential tax 

 treatment as against reliance on the price system. 



When representatives of the minerals industries talk about the first 

 question they prefer to discuss the trials and tribulations of the "wild- 

 catter" or lone prospector. That there are special risks in mineral dis- 

 covery and development, at least for the small operator, seems to be 

 clear. If a prospective manufacturer is willing to lay out an adequate 

 sum of money there is little doubt he will be able to build, equip, and 

 staff a producing plant. Whether he will be able to sell the goods is 

 another question. But to all the ordinary business risks of manufacture 

 there are added, for the prospective minerals producer, the risks first, 

 that with a given outlay he will not be in business at all, and second, 

 that if he is in business, with an organization built up at substantial 

 cost and difficulty, he will be able to continue in business when his 

 present ore body or oil field is exhausted. 



Although there are many wildcatters and lone prospectors, these 

 discoverers rarely work their own discoveries. The normal practice is 

 to sell out to going concerns. And for mining or oil companies of sub- 

 stantial size, it is difficult to see why the acquisition or replacement 

 of assets presents difficulties any more serious than those of a typical 

 manufacturer. Large companies with geographically dispersed opera- 

 tions are in a position, both in their own discovery activities and 

 through the purchase or lease of discovered properties, to spread — 

 and thus reduce — the risks of acquisition and replacement to some- 

 where near the levels obtaining in manufacture. And, of course, in the 

 case of producers of sand, gravel, and a number of other minerals, 

 the alleged distinction between mining and manufacture is ludicrous. 



Secondly, even if there are special risks, it is doubtful whether there 

 are any public interest advantages in providing differential tax treat- 

 ment as against reliance on the price system. Many other activities — 

 for example, writing, painting, research and development, and manu- 

 facture of fashion goods — face similar risks without special tax treat- 

 ment. In the absence of tax concessions there are prima facie reasons 

 for supposing that price adjustments would, on the average and over 

 time, compensate investors in mining properties at about the same 

 ratio as investors in other properties. And, finally, percentage deple- 

 tion represents a break in our tax system that has widened with the 



