A Goal Programming Approach for a Joint Design of Macroeconomic and Environmental Policies: A Methodological Proposal and an Application to the Spanish Economy

Abstract

The economic policy needs to pay increasingly more attention to the environmental issues, which requires the development of methodologies able to incorporate environmental, as well as macroeconomic, goals in the design of public policies. Starting from this observation, this article proposes a methodology based upon a Simonian satisficing logic made operational with the help of goal programming (GP) models, to address the joint design of macroeconomic and environmental policies. The methodology is applied to the Spanish economy, where a joint policy is elicited, taking into consideration macroeconomic goals (economic growth, inflation, unemployment, public deficit) and environmental goals (CO(2), NO( x ) and SO( x ) emissions) within the context of a computable general equilibrium model. The results show how the government can "fine-tune" its policy according to different criteria using GP models. The resulting policies aggregate the environmental and the economic goals in different ways: maximum aggregate performance, maximum balance and a lexicographic hierarchy of the goals.

Sustainability and intertemporal equity: a multicriteria approach

“…Email: simonem@uow.edu.au. 1 Another critical aspect associated to the use of the utilitarian approach is related to the role of the population size and its eventual growth. Specifically, two different utilitarian approaches have been proposed in literature, the average (welfare coincides with individual or average utility) and total (welfare is the sum of individual utilities across the population) utilitarianism.…”

Defining efficient policies in a general equilibrium model: a multi-objective approach

“…Overall output of sector j, Q j , is obtained from a Cobb-Douglas combination of domestic output and imports, Xrow j , according to the Armington hypothesis. 3 Nested production functions are commonly used in CGE modelling in order to describe the structure of different stages of production (see ref. [27] for a general discussion).…”

“…An immediate extension of this work would be to increase the number of policy objectives beyond two. Other companion papers, André and Cardenete [1] and André et al [3], explore these lines of extensions (i.e., modifying and enlarging the set of policy objectives). Specifically, André and Cardenete [1] uses Multi-objective Programming to find efficient subsidy policies in a regional economy considering as objectives the profit of selected sectors, and the overall growth of the economy, while André et al [3] presents an approach to design public policies considering both macroeconomic and environmental objectives.…”

Multi-criteria decision analysis with goal programming in engineering, management and social sciences: a state-of-the art review

“…André et al (2009) consider different (lexicographic, weighted and max-min) GP models to study the impact of alternative policy tools (direct and indirect taxes, environmental taxes and public expenditure) on both macroeconomic (economic growth, inflation, unemployment, public deficit) and environmental (CO 2 , N O x and SO x emissions) goals; the model is then tested trough an application to the Spanish economy. Colapinto et al (2014) propose a WGP model with satisfaction function to analyze the nature of the intergenerational equity and sustainable development relationship; they consider two goals (the sum of discounted finite-time utilities and an asymptotic utility level), to understand to what extent DMs can achieve their aim of maximizing social welfare by exploiting natural resources in the short run without compromising the ability of the society to enjoy them in the long run.…”