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Safe Minimum Standards in Dynamic Resource Problems—Conditions for Living on the Edge of Risk

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Author Info
Margolis, Michael
Naevdal, Eric

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Abstract

Abstract Safe Minimum Standards (SMSs) have been advocated as a policy rule for environmental problems where uncertainty about risks and consequences are thought to be profound. This paper explores the rationale for such a policy within a dynamic framework and derives conditions for when SMS can be summarily dismissed as a policy choice and for when SMS can be defended as an optimal policy based on standard economic criteria. We have determined that these conditions can be checked with quite limited information about damages and risks. In order to analyze the SMSs in a dynamic setting, we have developed a method for solving optimal control problems where the state space is divided into risky and non-risky subsets.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-04-03.

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Date of creation: 02 Apr 2004
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Handle: RePEc:rff:dpaper:dp-04-03

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Related research
Keywords: safe minimum standards; optimal control; critical zone; threshold effects; mixed risk spaces;

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Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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  2. Crowards, Tom M., 1998. "Safe Minimum Standards: costs and opportunities," Ecological Economics, Elsevier, vol. 25(3), pages 303-314, June. [Downloadable!] (restricted)
  3. Bryan G. Norton & Michael A. Toman, 1997. "Sustainability: Ecological and Economic Perspectives," Land Economics, University of Wisconsin Press, vol. 73(4), pages 553-568. [Downloadable!] (restricted)
  4. Broome, John, 1996. "The Welfare Economics of Population," Oxford Economic Papers, Oxford University Press, vol. 48(2), pages 177-93, April. [Downloadable!] (restricted)
  5. Richard T. Woodward & Richard C. Bishop, 1997. "How to Decide When Experts Disagree: Uncertainty-Based Choice Rules in Environmental Policy," Land Economics, University of Wisconsin Press, vol. 73(4), pages 492-507. [Downloadable!] (restricted)
  6. Gilboa, Itzhak & Schmeidler, David, 1989. "Maxmin expected utility with non-unique prior," Journal of Mathematical Economics, Elsevier, vol. 18(2), pages 141-153, April. [Downloadable!] (restricted)
  7. Clarke, Harry R. & Reed, William J., 1994. "Consumption/pollution tradeoffs in an environment vulnerable to pollution-related catastrophic collapse," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 991-1010, September. [Downloadable!] (restricted)
  8. Cropper, M. L., 1976. "Regulating activities with catastrophic environmental effects," Journal of Environmental Economics and Management, Elsevier, vol. 3(1), pages 1-15, June. [Downloadable!] (restricted)
  9. Casadesus-Masanell, Ramon & Klibanoff, Peter & Ozdenoren, Emre, 2000. "Maxmin expected utility through statewise combinations," Economics Letters, Elsevier, vol. 66(1), pages 49-54, January. [Downloadable!] (restricted)
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