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

Int J of Economic Theory

2019

Self Cite

We construct a dynamic competitive model with a stock of human-made capital and several stocks of natural resources and ask under what conditions consumption will be constant if infinitesimal households with heterogeneous preferences and endowments discount their utility at an endogenous rate that depends on some macroeconomic variables. We show that for consumption to be constant, this function must be the marginal product of capital function. We demonstrate that Hartwick's rule holds in a modified form that takes account of natural growth of resource stocks.

Section: Discussionmentioning

confidence: 99%

Sustainability with endogenous discounting

Hartwick

Int J of Economic Theory

2019

Self Cite

“…We consider the following sustainability indicators of consumption and resource stock, 13 I 1 (c, r, S, K) ≡ c , I 2 (c, r, S, K) ≡ S , 13 Several authors have used the production-consumption economy to address the climate change issue (e.g., [9,29]). The nonrenewable resource is related to fossil energy.…”

Section: S(t) = −R(t)mentioning

confidence: 99%

Combining rights and welfarism: a new approach to intertemporal evaluation of social alternatives

Martinet

2017

Soc Choice Welf

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. We propose a new criterion which reflects both the concern for welfare (utility) and the concern for rights in the evaluation of economic development paths. The concern for rights is captured by a pre-ordering over combinations of thresholds (floors or ceilings on various quantitative indicators) that serve as constraints on actions and on levels of state variables. These thresholds are interpreted as minimal rights to be guaranteed to all generations. They are endogenously chosen within the set of all feasible thresholds, accounting for the "cost in terms of welfare" of achieving these rights. We apply the criterion to several examples, including the standard Dasgupta-Heal-Solow model of resource extraction and capital accumulation. We show that if the weight given to rights in the criterion is sufficiently high, the optimal solution may be on the threshold possibility frontier. The development path is then "driven" by the rights. In particular, if a minimal consumption is considered as a right, constant consumption can be optimal even with a positive utility discount rate. The shadow prices of thresholds play an important role in the determination of the rate of discount to be applied to social investment projects. Terms of use: Documents inJEL-Code: D630, H430, Q010.

“…19 Several authors have used the production-consumption economy to address the climate change issue (e.g., [9,29]). The nonrenewable resource is related to fossil energy.…”

Section: An Example: the Production-consumption Economy With A Nonrenewable Resourcementioning

confidence: 99%

“…One may say that this rules out "dictatorship of the least advantaged. "9 The MBR criterion, just as Chilchilnisky's criterion, is based on cardinal utility. It can be generalized, so that the discount rate can be variable, as in Chilchilnisky's case.…”

mentioning

confidence: 99%

Combining Rights and Welfarism: A New Approach to Intertemporal Evaluation of Social Alternatives

Martinet

2012

SSRN Journal

We propose a new criterion which reflects both the concern for welfare (utility) and the concern for rights in the evaluation of economic development paths. The concern for rights is captured by a pre-ordering over combinations of thresholds (floors or ceilings on various quantitative indicators) that serve as constraints on actions and on levels of state variables.These thresholds are interpreted as minimal rights to be guaranteed to all generations.They are endogenously chosen within the set of all feasible thresholds, accounting for the "cost in terms of welfare" of achieving these rights. We apply the criterion to several examples, including the standard Dasgupta-Heal-Solow model of resource extraction and capital accumulation. We show that if the weight given to rights in the criterion is sufficiently high, the optimal solution may be on the threshold possibility frontier. The development path is then "driven" by the rights. In particular, if a minimal consumption is considered as a right, constant consumption can be optimal even with a positive utility discount rate. The shadow prices of thresholds play an important role in the determination of the rate of discount to be applied to social investment projects.