On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion

Dixit, Avinash; Hammond, Peter J.; Hoel, Michael

doi:10.2307/2297306

“…Weitzman, 1976, equation above (14)). Finally, Dixit et al (1980) demonstrate the relationship between a positive value of net investments, on the one hand, and a positive present value of future consumption growth, on the other.…”

Section: Introductionmentioning

confidence: 85%

“…In Section 2, I give an interpretation of the basic insights and results of welfare accounting, as developed by Samuelson (1961), Weitzman (1970Weitzman ( , 1976, and 3 Dixit et al (1980). In particular, Samuelson (1961) argues that welfare changes should be measured by the present value of future changes in consumption, an insight that Heal and Kriström have brought to our attention through various contributions during the last years (see, e.g., Heal and Kriström, 2005).…”

Section: Introductionmentioning

confidence: 97%

Can NNP be used for welfare comparisons?

Asheim¹

2007

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper contains a critical assessment of the claim that nnp can be used for welfare comparisons. The analysis assumes that national accounts are comprehensive (in particular, "greened" by taking into account environmental amenities and natural resource depletion), but does not assume optimal resource allocation. The general conclusion is that greater nnp does not correspond to welfare enhancement, unless the net investment flows are revalued. Real utility-nnp, and real measurable nnp made comparable across time by means of a consumer price index, allow for such revaluation, and thus indicate welfare improvement. Terms of use: Documents inKeywords and Phrases: National income accounting, dynamic welfare JEL Classification Numbers: C43, D60, O47, Q01 * I thank participants at the 12th Ulvön Conference on Environmental Economics for helpful comments.Address: Department of Economics, University of Oslo, P.O. Box 1095 Blindern, NO-0317 Oslo, Norway (e-mail: g.b.asheim@econ.uio.no) 1 Summary This paper contains a critical assessment of the claim that comprehensive net national product (nnp) can be used for welfare comparisons. The assertion that nnp is endowed with welfare significance has been subject to controversy, from the seminal contributions by Samuelson and Weitzman to a number of more recent articles. Here I contribute to this debate in the following two ways:1. I give an interpretation of the basic insights and results of welfare accounting in a general setting.2. Building on these insights I warn against using nnp for measuring the welfare effects of capital perturbations, and derive the result that real nnp growth in variable consumption and net investment prices can be used to indicate welfare improvement.The general conclusion is that greater nnp does not correspond to welfare enhancement, unless the net investment flows are revalued. Real utility-nnp, and real measurable nnp made comparable across time by means of a consumer price index, allow for such revaluation, and thus indicate welfare improvement. I reconcile my results with the findings presented in the relevant literature. I use the Dasgupta-Heal-Solow model to illustrate the analysis and results.I invoke weak assumptions concerning how dynamic welfare is derivedby not necessarily assuming discounted utilitarianism-and how the economy functions-by not necessarily assuming an optimal resource allocation mechanism. Throughout I am concerned with local comparisons, either "small...

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“…Without population growth and technical progress, the Hartwick rule also results in a max-min optimum in economies with many consumption goods, heterogeneous capital goods and endogenous labour supplies provided there is free disposal and stock reversal (Dixit et al, 1980). The conditions under which a max-min optimum implies adherence to the Hartwick rule are also known (e.g., Withagen and Asheim, 1998;Mitra, 2002).…”

Section: Appendix 2: Endogenous Growth and Dutch Diseasementioning

confidence: 99%

Natural Resources: Curse or Blessing?

Ploeg

¹

2011

Journal of Economic Literature

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Are natural resources a "curse" or a "blessing"? The empirical evidence suggests either outcome is possible. The paper surveys a variety of hypotheses and supporting evidence for why some countries benefit and others lose from the presence of natural resources. These include that a resource bonanza induces appreciation of the real exchange rate, deindustrialization and bad growth prospects, and that these adverse effects are more severe in volatile countries with bad institutions and lack of rule of law, corruption, presidential democracies, and underdeveloped financial systems. Another hypothesis is that a resource boom reinforces rent grabbing and civil conflict especially if institutions are bad, induces corruption especially in non-democratic countries, and keeps in place bad policies. Finally, resource rich developing economies seem unable to successfully convert their depleting exhaustible resources into other productive assets. The survey also offers some welfare-based fiscal rules for harnessing resource windfalls in developed and developing economies. Terms of use: Documents inJEL-Code: C12, C13, E01, F43, K42, O41, Q30.

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“…3 Hamilton and Ulph [1995] developed a somewhat di¤erent version of a Solow model with global warming independently of Stollery. 4 See for instance Farzin and Tahvonen (1996). 5 We drop the time argument when no ambiguity arises.…”

Section: Notesmentioning

confidence: 99%

“…It amounts to neglect the absorption of carbon dioxide by natural sinks, thus considering that carbon emissions are irreversible. Natural carbon absorption is possibly an important feature of the global warming phenomenon 4 , but its extent and especially its stability are controversial, so that discarding it is probably a reasonable assumption.…”

mentioning

confidence: 99%

The zero discounting and maximin optimal paths in a simple model of global warming

d’Autume

¹

,

Hartwick

²

,

Schubert

³

2010

Mathematical Social Sciences

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Following Stollery (1998), we extend the Solow-Dasgupta-Heal model to analyze the e¤ects of global warming The rise of temperature is caused by the use of fossil resources so that the temperature level can be linked to the remaining stock of these resources. The rise of temperature a¤ects both productivity and utility. We characterize optimal solutions for the maximin and zero-discounting cases and present closed form solutions for the case where the production and utility functions are Cobb-Douglas, and the temperature level is an exponential function of the remaining stock of resources. We show that a greater weight of temperature in intratemporal preferences or a larger intertemporal elasticity of substitution both lead to postpone resource use.

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On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion

Cited by 228 publications

References 7 publications

Can NNP be used for welfare comparisons?

Can NNP be used for welfare comparisons?

Natural Resources: Curse or Blessing?

The zero discounting and maximin optimal paths in a simple model of global warming

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