EDWARD S. MASON 167 



inclusion of every type of mineral-producing activity regardless of 

 special risk characteristics, and deepened with every rise in the income 

 tax assessed against nonmineral activities. 



It is not, however, my purpose here to pronounce a judgment for 

 or against percentage depletion. I wish merely to highlight an impor- 

 tant area of inquiry in the political economy of natural resource use. 

 Does the functioning of a competitive price system tend to produce a 

 less than ideal, or socially desirable, investment of resources in min- 

 eral discovery and development? If it does, what type of public inter- 

 vention is best designed to correct this deficiency? 



Since I have had occasion to mention the oil industry and will do 

 so frequently later, it is necessary, before proceeding to the next topic, 

 to clear up a possible misapprehension. Our present system of deple- 

 tion allowances, regulation of output, and import limitation has pro- 

 duced a situation in which there is a very sizable "cushion" between 

 actual and possible production. The availability of this cushion has 

 been considered to be of great importance to the security of the United 

 States. Whether the existence of such a cushion is still important when 

 refining and consuming facilities may be more vulnerable to attack 

 than crude production, is a different question. But it is well to recog- 

 nize that there is more to the question of an appropriate national oil 

 policy than the merely economic issues that are here under consid- 

 eration. 



The Instability of Raw Materials Industries 



The instabilities of commodity markets and their proposed remedies 

 have been so extensively discussed that only a brief recapitulation of 

 the issues need be attempted here. 



It is commonly argued that, taking account of supply and demand 

 inelasticities in the raw materials area, an unimpeded functioning of 

 the price system will produce a range of price variation that not only 

 hampers the attainment of ideal investment in natural resource indus- 

 tries, but is much larger than necessary to accomplish "structural" 

 adjustments of production to long-term changes in the pattern of con- 

 sumption. It is furthermore said that this volatility of raw materials 



