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198 • Microeconomicsmarkets in general are highly imperfect because of cartels, an absence ofcompetition, poorly defined property rights, and imperfect information,they will not reveal true user costs. As an alternative measure, economistscan estimate the time of total depletion of the resource, the time when we’llhave to turn to the best available substitute, assuming there is one. If thereis a reasonable renewable substitute (e.g., solar power) or extremely abundantsubstitute (e.g., hydrogen fusion) for the resource in question (knownas a backstop technology), the price of the resource can never rise above theprice of the substitute. This reduces the opportunity cost of using the resourcein the present—that is, it lowers the user cost, thereby leading tomore rapid extraction and a lower price. To determine the user cost, theextra unit cost of the best substitute, over and above that of the depleted resource,is estimated. That amount is then discounted from the future dateof exhaustion back to the present to tell us the marginal user cost.In summary, the user cost will be low if (1) the discount rate is high,(2) exhaustion is far in the future because either reserves are large orannual usage rates are low, and (3) good substitutes are expected to beavailable, or high if opposite conditions exist. We see once again the im-Box 11-1Marginal User Cost in SustainableIncome AccountingIt is interesting that in discussing user cost, John Maynard Keynes, arguablythe most influential economist of the twentieth century, was interestedmainly in applying the concept to depreciation of the fund ofmanmade capital (in order to arrive at a proper measure of income). Hemade reference to the more “obvious” case of accounting for user cost ina copper mine (natural capital) as a way of clarifying his argument. aNowadays, if texts discuss user cost at all, they refer to the more “obvious”necessity of accounting for depreciation of manmade capital as anargument for applying the same logic to natural capital. Perhaps this reversalis a measure of how much we have recently come to neglect naturalcapital.In any case, recalling our terminology of previous chapters, it is clearthat user cost is a necessary charge for the depletion of stocks (naturalor manmade inventories) and the depreciation of funds (natural andmanmade productive equipment). In proper accounting usage, both inventoriesand machines are capital. Inventories are depleted; machinesare depreciated. Both require the accounting of user cost. If user cost isnot deducted in calculating income, then income will be overstated andwill not be sustainable. In most national accounts around the world, usercost is erroneously counted as income. b Keynes, as the major architect of