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The Rise, Fall and Sustainability of Capital‐Resource Economies

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  • John Pezzey
  • Cees A. Withagen

Abstract

In debates about green accounting it is sometimes argued that a positive value of aggregate investments indicates that an economy is developing sustainably. Asheim (1994) and Pezzey (1994) have shown that this is wrong, using a version of the well‐known Dasgupta–Heal economy (with one capital and one non‐renewable resource stock) as a counterexample. Asheim’s proof referred to the unproved assumptions that in such an economy a higher rate of time preference induces higher initial consumption and vice versa, and that “optimal” consumption is initially rising and then falling. Here we show that these assumptions do hold true under certain circumstances, thereby also proving some of Dasgupta and Heal’s other conjectures about sustainability.

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  • John Pezzey & Cees A. Withagen, 1998. "The Rise, Fall and Sustainability of Capital‐Resource Economies," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(2), pages 513-527, June.
    • Handle: RePEc:bla:scandj:v:100:y:1998:i:2:p:513-527
    DOI: 10.1111/1467-9442.00117
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    Cited by:

    1. Geir Asheim & Wolfgang Buchholz & Cees Withagen, 2003. "The Hartwick Rule: Myths and Facts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(2), pages 129-150, June.
    2. Asheim, Geir B., 2007. "Can NNP be used for welfare comparisons?," Environment and Development Economics, Cambridge University Press, vol. 12(1), pages 11-31, February.
    3. Pezzey, John C.V. & Toman, Michael, 2002. "The Economics of Sustainability: A Review of Journal Articles," Discussion Papers 10683, Resources for the Future.
    4. Bazhanov, Andrei, 2008. "Sustainable growth in a resource-based economy: the extraction-saving relationship," MPRA Paper 12350, University Library of Munich, Germany.
    5. Rickels, Wilfried & Weigand, Christian & Grasse, Patricia & Schmidt, Jörn Oliver & Voss, Rüdiger, 2018. "Does the European Union achieve comprehensive blue growth? Progress of EU coastal states in the Baltic and North Sea, and the Atlantic Ocean against sustainable development Goal 14," Kiel Working Papers 2112, Kiel Institute for the World Economy (IfW Kiel).
    6. Simone Valente, 2009. "Accumulation Regimes in Dynastic Economies with Resource Dependence and Habit Formation," CER-ETH Economics working paper series 09/101, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    7. Brock, William A. & Taylor, M. Scott, 2005. "Economic Growth and the Environment: A Review of Theory and Empirics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 28, pages 1749-1821, Elsevier.
    8. Kirk Hamilton & John M. Hartwick, 2005. "Investing exhaustible resource rents and the path of consumption," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(2), pages 615-621, May.

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