Paradoxical consumption behavior when economic activity has environmental effects
In a model where enhanced economic activity (accumulation of produced capital) leads to environmental effects (depletion of natural capital), competitive steady states corresponding to different discount rates are compared. For positive discount rates, the steady state stock of produced capital may exceed the size maximizing sustainable consumption. This implies paradoxical consumption behavior; that is, a lower discount rate may be associated with lower steady state consumption. The theoretical significance of this phenomenon for intergenerational equity is discussed, and examples indicating the empirical relevance of the underlying assumptions are presented.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Avinash Dixit & Peter Hammond & Michael Hoel, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," Review of Economic Studies, Oxford University Press, vol. 47(3), pages 551-556.
- Avi J. Cohen, 2003. "Retrospectives: Whatever Happened to the Cambridge Capital Theory Controversies?," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 199-214, Winter.
- Becker, Robert A., 1982. "Intergenerational equity: The capital-environment trade-off," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 165-185, June.
- Geir Asheim & Wolfgang Buchholz & Cees Withagen, 2003.
"The Hartwick Rule: Myths and Facts,"
Environmental & Resource Economics,
Springer;European Association of Environmental and Resource Economists, vol. 25(2), pages 129-150, June.
- Asheim,G.B. & Buchholz,W., 2000. "The Hartwick rule : myths and facts," Memorandum 11/2000, Oslo University, Department of Economics.
- Asheim, G.B. & Buchholz, W. & Withagen, C.A.A.M., 2002. "The Hartwick Rule : Myths and Facts," Discussion Paper 2002-52, Tilburg University, Center for Economic Research.
- Geir B. Asheim & Wolfgang Buchholz, 2000. "The Hartwick Rule: Myths and Facts," CESifo Working Paper Series 299, CESifo Group Munich.
- Burmeister, Edwin & Hammond, P J, 1977. "Maximin Paths of Heterogeneous Capital Accumulation and the Instability of Paradoxical Steady States," Econometrica, Econometric Society, vol. 45(4), pages 853-870, May.
- Asheim, Geir B. & Weitzman, Martin L., 2001. "Does NNP growth indicate welfare improvement?," Economics Letters, Elsevier, vol. 73(2), pages 233-239, November.
- Asheim,G.B. & Weitzman,M.L., 2001. "Does NNP growth indicate welfare improvement?," Memorandum 02/2001, Oslo University, Department of Economics.
- Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-974, December.
- John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
- Barkley Rosser, J. Jr., 1983. "Reswitching as a cusp catastrophe," Journal of Economic Theory, Elsevier, vol. 31(1), pages 182-193, October.
- Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-380, December.
- Geir Asheim & Tapan Mitra & Bertil Tungodden, 2012. "Sustainable recursive social welfare functions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 49(2), pages 267-292, February.
- Asheim, Geir B. & Mitra, Tapan & Tungodden, Bertil, 2006. "Sustainable recursive social welfare functions," Memorandum 18/2006, Oslo University, Department of Economics.
- Joan Robinson, 1975. "The Unimportance of Reswitching," The Quarterly Journal of Economics, Oxford University Press, vol. 89(1), pages 32-39.
- R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," Review of Economic Studies, Oxford University Press, vol. 41(5), pages 29-45.
- R. M. Solow, 1973. "Intergenerational Equity and Exhaustable Resources," Working papers 103, Massachusetts Institute of Technology (MIT), Department of Economics.
- Clark, Colin W & Clarke, Frank H & Munro, Gordon R, 1979. "The Optimal Exploitation of Renewable Resource Stocks: Problems of Irreversible Investment," Econometrica, Econometric Society, vol. 47(1), pages 25-47, January. Full references (including those not matched with items on IDEAS)