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A constant-utility criterion linked to an imperfect economy affected by irreversible global warming

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Author Info
Andrei V. Bazhanov

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Abstract

The question of formulation of a social planner criterion for an imperfect economy is examined using an example of a polluting economy negatively affected by growing temperature. Imperfection of the economy is expressed here in deviations from the optimal initial state. It is shown that a criterion not linked to a specific initial state almost always implies either unsustainable or inefficient paths in the economy. In this paper, I link the constant-utility criterion to the initial amount of the resource reserve. This criterion implies efficient resource use and the paths of utility asymptotically approaching some constants, which depend on the parameters of the temperature function. The criterion can be formulated for the cases when the reserve estimate changes over time and when the high level of temperature can cause extinction.

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Paper provided by Economics and Econometrics Research Institute (EERI) in its series EERI Research Paper Series with number EERI_RP_2009_03.

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Length: 37 pages
Date of creation: 03 Feb 2009
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Handle: RePEc:eei:rpaper:eeri_rp_2009_03

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Related research
Keywords: Essential nonrenewable resource; imperfect polluting economy; economy-linked criterion; semisustainable development; semiefficient extraction.;

Find related papers by JEL classification:
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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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.:
  1. Kenneth Stollery, 1998. "Constant Utility Paths and Irreversible Global Warming," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 730-742, August. [Downloadable!] (restricted)
  2. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-74, December. [Downloadable!] (restricted)
    Other versions:
  3. Kenneth Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "Evaluating Projects and Assessing Sustainable Development in Imperfect Economies," Working Papers 2003.109, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  4. Daly, Herman E., 1990. "Toward some operational principles of sustainable development," Ecological Economics, Elsevier, vol. 2(1), pages 1-6, April. [Downloadable!] (restricted)
  5. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November. [Downloadable!] (restricted)
  6. Bazhanov, Andrei, 2008. "Sustainable growth in a resource-based economy: the extraction-saving relationship," MPRA Paper 12350, University Library of Munich, Germany. [Downloadable!]
  7. Andrei V. Bazhanov, 2008. "Maximin-optimal sustainable growth with nonrenewable resource and externalities," EERI Research Paper Series EERI_RP_2008_11, Economics and Econometrics Research Institute (EERI). [Downloadable!]
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  8. Krautkraemer, Jeffrey A, 1985. "Optimal Growth, Resource Amenities, and the Preservation of Natural Environments," Review of Economic Studies, Blackwell Publishing, vol. 52(1), pages 153-70, January. [Downloadable!] (restricted)
  9. Bazhanov, Andrei V., 2007. "The transition to an oil contraction economy," Ecological Economics, Elsevier, vol. 64(1), pages 186-193, October. [Downloadable!] (restricted)
  10. Kolstad, Charles D. & Krautkraemer, Jeffrey A., 1993. "Natural resource use and the environment," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 26, pages 1219-1265 Elsevier. [Downloadable!] (restricted)
  11. Neumayer, Eric, 2000. " Scarce or Abundant? The Economics of Natural Resource Availability," Journal of Economic Surveys, Blackwell Publishing, vol. 14(3), pages 307-35, July. [Downloadable!] (restricted)
  12. Graciela Chichilnisky, 1996. "An axiomatic approach to sustainable development," Social Choice and Welfare, Springer, vol. 13(2), pages 231-257, April. [Downloadable!] (restricted)
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  13. Schou, Poul, 2002. " When Environmental Policy Is Superfluous: Growth and Polluting Resources," Scandinavian Journal of Economics, Blackwell Publishing, vol. 104(4), pages 605-20, December. [Downloadable!] (restricted)
  14. Grimaud, Andre & Rouge, Luc, 2005. "Polluting non-renewable resources, innovation and growth: welfare and environmental policy," Resource and Energy Economics, Elsevier, vol. 27(2), pages 109-129, June. [Downloadable!] (restricted)
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