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The Hartwick Rule: Myths and Facts

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  • Geir B. Asheim
  • Wolfgang Buchholz

Abstract

We consider the Hartwick rule for capital accumulation and resource depletion, provide semantic clarifications and investigate whether this rule indicates sustainability and requires substitutability between manmade and natural capital. In addition to shedding light on the meaning of the Hartwick rule by reviewing established results, we establish the following novel finding: The value of net investments being negative does not imply that utility is unsustainable. Throughout we make the assumption of a constant technology, without which the Hartwick rule does not apply.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 299.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_299

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Keywords: Hartwick rule; natural resources; sustainability;

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  1. Withagen, C.A.A.M. & Vellinga, N., 1996. "On the concept of green national income," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3107027, Tilburg University.
  2. Asheim, Geir B, 1994. " Net National Product as an Indicator of Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 96(2), pages 257-65.
  3. Cass, David, 1990. "Indefinitely sustained consumption despite exhaustible natural resources," CEPREMAP Working Papers (Couverture Orange) 9027, CEPREMAP.
  4. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, Elsevier, in: A. V. Kneeseā€  & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880 Elsevier.
  5. R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 103, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Withagen, Cees & B. Asheim, Geir, 1998. "Characterizing sustainability: The converse of Hartwick's rule," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 23(1), pages 159-165, September.
  7. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, American Economic Association, vol. 67(5), pages 972-74, December.
  8. Pezzey, John C V & Withagen, Cees A, 1998. " The Rise, Fall and Sustainability of Capital-Resource Economies," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 100(2), pages 513-27, June.
  9. Hanley, Nick & Shogren, Jason & White, Ben, 2013. "Introduction to Environmental Economics," OUP Catalogue, Oxford University Press, Oxford University Press, edition 2, number 9780199568734, October.
  10. Dixit, Avinash & Hammond, Peter & Hoel, Michael, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 47(3), pages 551-56, April.
  11. Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521297615.
  12. Weitzman, Martin L, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(1), pages 156-62, February.
  13. Dasgupta, Swapan & Mitra, Tapan, 1983. "Intergenerational Equity and Efficient Allocation of Exhaustible Resources," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(1), pages 133-53, February.
  14. Kirk Hamilton, 1995. "Sustainable development, the Hartwick rule and optimal growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 5(4), pages 393-411, June.
  15. John C. V. Pezzey, 2002. "One-sided Unsustainability Tests and NNP Measurement with Multiple Consumption Goods," Economics and Environment Network Working Papers, Australian National University, Economics and Environment Network 0208, Australian National University, Economics and Environment Network.
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