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National product related welfare measures in the presence of technological change: Externalities and uncertainty

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  • Thomas Aronsson
  • Karl-Gustaf Löfgren
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    Abstract

    The purpose of this paper is to discuss under what conditions welfare can be measured by observables related to the national product (or Hamiltonian along the optimal trajectory). Under nonattributable technological or environmental change, welfare will depend on time itself, meaning that the Hamiltonian along the optimal trajectory will be a biased measure of welfare. This result will also hold if we make the time dependence of welfare endogenous, by replacing technological change will externalities that are not internalized during optimization. On the other hand, if we take the externalities fully into account, then the Hamiltonian will represent the appropriate measure of welfare. Similar results also hold in the case of uncertainty, where we show that a ‘generalized’ Hamiltonian provides a welfare measure, and that the deterministic measures are special cases of their stochastic counterparts. Copyright Kluwer Academic Publishers 1995

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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

    Volume (Year): 5 (1995)
    Issue (Month): 4 (June)
    Pages: 321-332

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    Handle: RePEc:kap:enreec:v:5:y:1995:i:4:p:321-332

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    Web page: http://www.springerlink.com/link.asp?id=100263

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    References

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    1. Merton, Robert C., 1973. "An asymptotic theory of growth under uncertainty," Working papers 673-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Karl-Göran Mäler, 1991. "National accounts and environmental resources," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 1(1), pages 1-15, March.
    3. Weitzman, Martin L, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 156-62, February.
    4. William A. Brock & Michael J. P. Magill, 1978. "Dynamics Under Uncertainty," Discussion Papers 324, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Hulten, Charles R, 1992. " Accounting for the Wealth of Nations: The Net versus Gross Output Controversy and Its Ramifications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S9-24, Supplemen.
    6. Asheim, G.B. & Brekke, K.A., 1993. "Sustainability when Resource Management has Stochastic Consequences," Papers 01-93, Norwegian School of Economics and Business Administration-.
    7. John M. Hartwick, 1990. "Natural Resources, National Accounting and Economic Depreciation," Working Papers 771, Queen's University, Department of Economics.
    8. Asheim, Geir B, 1994. " Net National Product as an Indicator of Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(2), pages 257-65.
    9. Magill, Michael J. P., 1977. "Some new results on the local stability of the process of capital accumulation," Journal of Economic Theory, Elsevier, vol. 15(1), pages 174-210, June.
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    Cited by:
    1. Martin L. Weitzman, 1996. "On the Welfare Significance of National Product Under Interest-Rate Uncertainty," Harvard Institute of Economic Research Working Papers 1776, Harvard - Institute of Economic Research.
    2. Butterfield, David W., 2003. "Resource depletion under uncertainty: implications for mine depreciation, Hartwick's Rule and national accounting," Resource and Energy Economics, Elsevier, vol. 25(3), pages 219-238, August.
    3. Samakovlis, Eva, 2008. "How are Green National Accounts Produced in Practice?," Working Paper 105, National Institute of Economic Research.
    4. Marklund, Per-Olov, 2004. "Essays on Productive Efficiency, Shadow Prices, and Human Capital. PhD Thesis," UmeÃ¥ Economic Studies 621, Umeå University, Department of Economics.
    5. Gret-Regamey, Adrienne & Kytzia, Susanne, 2007. "Integrating the valuation of ecosystem services into the Input-Output economics of an Alpine region," Ecological Economics, Elsevier, vol. 63(4), pages 786-798, September.
    6. Kenneth Backlund, 2003. "On the Role of Green Taxes in Social Accounting," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 25(1), pages 33-50, May.
    7. Mino, Kazuo, 2004. "Weitzman's rule with market distortions," Japan and the World Economy, Elsevier, vol. 16(3), pages 307-329, August.
    8. Winter-Nelson, Alex, 1996. "Discount rates, natural resources, and the measurement of aggregate economic growth in Africa," Ecological Economics, Elsevier, vol. 17(1), pages 21-32, April.
    9. Chuan-Zhong Li & Karl-Gustaf Löfgren, 2012. "Genuine saving under stochastic growth," Letters in Spatial and Resource Sciences, Springer, vol. 5(3), pages 167-174, October.
    10. Li, Chuan-Zhong & Lofgren, Karl-Gustaf, 2000. "Renewable Resources and Economic Sustainability: A Dynamic Analysis with Heterogeneous Time Preferences," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 236-250, November.
    11. Mino, Kazuo, 2004. "On the Generalized Weitzman's Rule," MPRA Paper 16996, University Library of Munich, Germany.
    12. Haener, Michel K. & Adamowicz, Victor L., 2000. "Incorporation of risk in regional forest resource accounts," Ecological Economics, Elsevier, vol. 33(3), pages 439-455, June.
    13. Winter-Nelson, Alex, 1995. "Natural resources, national income, and economic growth in Africa," World Development, Elsevier, vol. 23(9), pages 1507-1519, September.

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