Controlling Stocks and Flows to Promote Quality: The Environment, With Applications to Physical and Human Capital
Our analysis melds two traditional approaches to promoting quality. The first is restoring the stock of quality. The second is curbing its flow of deterioration. Although both approaches are widely used in real world settings, analytic models have tended to focus on one strategy or the other. We consider a class of problems, which we call SFQ' problems, in which both stocks and flows can be controlled to promote quality. We develop our results in the context of environmental quality, drawing on real-world examples from atomic wastes to zebra mussels. But the lessons are general, and we show how they apply to promoting the quality of both physical and human capital. We first study optimal policies in the limiting cases when only abatement or restoration is possible. We then focus on the full SFQ world, where both approaches can be used. We show that the optimal policy employs both instruments. Moreover, when combined optimally, neither strategy takes the form it would in the absence of the other.
|Date of creation:||Jun 2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Smith, Vernon L, 1972. "Dynamics of Waste Accumulation: Disposal Versus Recycling," The Quarterly Journal of Economics, MIT Press, vol. 86(4), pages 600-616, November.
- Andrew B. Abel & Janice C. Eberly, .
"A Unified Model of Investment Under Uncertainty,"
Rodney L. White Center for Financial Research Working Papers
14-93, Wharton School Rodney L. White Center for Financial Research.
- Falk Ita & Mendelsohn Robert, 1993. "The Economics of Controlling Stock Pollutants: An Efficient Strategy for Greenhouse Gases," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 76-88, July.
- Keeler, Emmett & Spence, Michael & Zeckhauser, Richard, 1972. "The optimal control of pollution," Journal of Economic Theory, Elsevier, vol. 4(1), pages 19-34, February.
- Sanford J. Grossman & Guy Laroque, 1987.
"Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods,"
NBER Working Papers
2369, National Bureau of Economic Research, Inc.
- Grossman, Sanford J & Laroque, Guy, 1990. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Econometrica, Econometric Society, vol. 58(1), pages 25-51, January.
- Sanford J Grossman & Guy Laroque, 2003. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Levine's Working Paper Archive 618897000000000803, David K. Levine.
- Pindyck, Robert S., 1986.
"Irreversible investment, capacity choice, and the value of the firm,"
1802-86., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-85, December.
- Robert S. Pindyck, 1986. "Irreversible Investment, Capacity Choice, and the Value of the Firm," NBER Working Papers 1980, National Bureau of Economic Research, Inc.
- Russell Cooper & John Haltiwanger, 1990.
"The Aggregate Implications of Machine Replacement: Theory and Evidence,"
NBER Working Papers
3552, National Bureau of Economic Research, Inc.
- Cooper, Russell & Haltiwanger, John, 1993. "The Aggregate Implications of Machine Replacement: Theory and Evidence," American Economic Review, American Economic Association, vol. 83(3), pages 360-82, June.
- John Haltiwanger & Russell Cooper, 1992. "The Aggregate Implications Of Machine Replacement: Theory And Evidence," Working Papers 92-12, Center for Economic Studies, U.S. Census Bureau.
- C. G. Plourde, 1972. "A Model of Waste Accumulation and Disposal," Canadian Journal of Economics, Canadian Economics Association, vol. 5(1), pages 119-25, February.
- repec:cup:cbooks:9780521297615 is not listed on IDEAS
- Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
- Phillips, Carl V. & Zeckhauser, Richard J., 1998. "Restoring Natural Resources with Destination-Driven Costs," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 225-242, November.
- Plourde, Charles & Yeung, David, 1989. "A model of industrial pollution in a stochastic environment," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 97-105, March.
- Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
- Caputo, Michael R & Wilen, James E, 1995. "Optimal Cleanup of Hazardous Wastes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 217-43, February.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:7727. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.