Abstract
Hartwick's Rule suggests that reinvesting resource rents in capital can sustain consumption over time. But this relies on the assumption that capital can fully substitute for natural resources, an assumption increasingly challenged by evidence. This paper revises Hartwick's Rule by allowing for limited substitutability between capital and resource inputs. Using a CES production function, we show that under imperfect substitution, the classical rule fails: output collapses even if all resource rents are saved. We propose a revised rule that directs investment toward renewable capital that replaces the lost resource flow. If substitution starts early, the economy avoids collapse and sustains consumption. This is the paper's key contribution: a formal, tractable model showing when and why Hartwick's rule breaks down, and how a transition-oriented investment strategy can restore sustainability. The revised rule strengthens the case for refining genuine savings indicators and aligning resource revenues with long-term capacity building.