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Sustainability with endogenous discounting

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  • John M. Hartwick
  • Ngo Van Long

Abstract

We construct a dynamic competitive model with a stock of human‐made capital and several stocks of natural resources and ask under what conditions consumption will be constant if infinitesimal households with heterogeneous preferences and endowments discount their utility at an endogenous rate that depends on some macroeconomic variables. We show that for consumption to be constant, this function must be the marginal product of capital function. We demonstrate that Hartwick's rule holds in a modified form that takes account of natural growth of resource stocks.

Suggested Citation

  • John M. Hartwick & Ngo Van Long, 2020. "Sustainability with endogenous discounting," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(2), pages 216-221, June.
    • Handle: RePEc:bla:ijethy:v:16:y:2020:i:2:p:216-221
    DOI: 10.1111/ijet.12237
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    References listed on IDEAS

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    Cited by:

    1. Daniel Grainger, 2023. "Sustainability criterion implied externality pricing for resource extraction," Papers 2306.04065, arXiv.org.

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    More about this item

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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