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When is it Optimal to Exhaust a Resource in a Finite Time?

  • Y. Hossein Farzin

    (University of California)

  • Ken-Ichi Akao

    (Waseda University)

Exhaustion of a natural resource stock may be a rational choice for an individual and/or a community, even if a sustainable use for the resource is feasible and the resource users are farsighted and well informed on the ecosystem. We identify conditions under which it is optimal not to sustain resource use. These conditions concern the discounting of future benefits, instability of social system or ecosystem, nonconvexity of natural growth function, socio-psychological value of employment, and strategic interaction among resource users. The identification of these conditions can help design policies to prevent unsustainable patterns of resource use.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2006.23.

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Date of creation: Feb 2006
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Handle: RePEc:fem:femwpa:2006.23
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  1. Heal, Geoffrey M., 1993. "The optimal use of exhaustible resources," Handbook of Natural Resource and Energy Economics, in: A. V. Kneeseā€  & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 18, pages 855-880 Elsevier.
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  17. Ken-Ichi Akao, 2008. "Tax schemes in a class of differential games," Economic Theory, Springer, vol. 35(1), pages 155-174, April.
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