The question whether or not a given consumption policy is sustainable is closely linked to the way in which nature assimilates pollution and how pollution affects life on earth. In this paper, an assimilation function is specified that is founded on the natural sciences literature. Hereby, the possibility of a break down of the life support system of the earth is explicitly taken into account. It is concluded that an optimal consumption policy need not be sustainable in a physical sense, i.e. the break down of the life support system cannot always be attributed to a market failure. In the model I consider a kind of externality that cannot be linked to any specific variable in either the utility or production function. It means that in some cases a traditional pigouvian tax alone cannot correct for the externality. This has to be done by making use of an extra tax instrument, the overendowment tax.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
102.
For technical questions regarding this item, or to correct its listing, contact: (Corry Stuyts).
Related research
Keywords:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)