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The peak of oil extraction and a modified maximin principle

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  • Bazhanov, Andrei

Abstract

The term "oil peak" usually is connected with the positive analysis problem, namely, with the problem of defining the year when the increase in the rate of oil extraction will be physically impossible. However, a normative approach to the problem of optimal extraction of a nonrenewable resource seems more important. We consider the economy which depends on the essential nonrenewable resource and the rate of the resource extraction increases over time. At some instant the government gradually switches to a sustainable (in sense of nondecreasing consumption over time) pattern of the resource extraction. Different criteria are considered for the construction some curves of switching to decreasing paths of the resource depletion. Consumption paths have diverse behavior patterns along these curves, including a path of unlimited growth. A new approach to the Rawlsian maximin criterion which allows for growth of consumption is offered.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 14775.

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Date of creation: 03 Dec 2006
Date of revision: 12 Feb 2007
Handle: RePEc:pra:mprapa:14775

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Keywords: Nonrenewable resource; Intergenerational justice; Generalized Rawlsian criterion;

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References

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  1. Asheim, Geir B. & Buchholz, Wolfgang & Hartwick, John M. & Mitra, Tapan & Withagen, Cees, 2005. "Constant savings rates and quasi-arithmetic population growth under exhaustible resource constraints," Memorandum, Oslo University, Department of Economics 23/2005, Oslo University, Department of Economics.
  2. Simon Kuznets & Lillian Epstein & Elizabeth Jenks, 1946. "National Product Since 1869," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number kuzn46-1.
  3. Poterba, James M, 1988. "Are Consumers Forward Looking? Evidence from Fiscal Experiments," American Economic Review, American Economic Association, American Economic Association, vol. 78(2), pages 413-18, May.
  4. 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.
  5. Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 61(2), pages 169-79, May.
  6. James Konow, 2003. "Which Is the Fairest One of All? A Positive Analysis of Justice Theories," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 41(4), pages 1188-1239, December.
  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. Bazhanov, Andrei, 2006. "Decreasing of Oil Extraction: Consumption behavior along transition paths," MPRA Paper, University Library of Munich, Germany 469, University Library of Munich, Germany.
  9. Griffin, James M & Gregory, Paul R, 1976. "An Intercountry Translog Model of Energy Substitution Responses," American Economic Review, American Economic Association, American Economic Association, vol. 66(5), pages 845-57, December.
  10. Fuss, Melvyn A., 1977. "The demand for energy in Canadian manufacturing : An example of the estimation of production structures with many inputs," Journal of Econometrics, Elsevier, Elsevier, vol. 5(1), pages 89-116, January.
  11. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 18(3), pages 147-172, Summer.
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Cited by:
  1. Bazhanov, Andrei, 2008. "Maximin-optimal sustainable growth with nonrenewable resource and externalities," MPRA Paper, University Library of Munich, Germany 9510, University Library of Munich, Germany, revised 02 Jul 2008.
  2. Bazhanov, Andrei, 2008. "Sustainable growth: Compatibility between criterion and the initial state," MPRA Paper, University Library of Munich, Germany 9914, University Library of Munich, Germany.
  3. Bazhanov, Andrei, 2008. "Inconsistency between a criterion and the initial conditions," MPRA Paper, University Library of Munich, Germany 6792, University Library of Munich, Germany.
  4. Bazhanov, Andrei V., 2007. "The transition to an oil contraction economy," Ecological Economics, Elsevier, Elsevier, vol. 64(1), pages 186-193, October.
  5. Bazhanov, Andrei, 2007. "Switching to a sustainable efficient extraction path," MPRA Paper, University Library of Munich, Germany 2976, University Library of Munich, Germany.

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