ssrn-id1613 - Sustainable Use of Renewable Resourcesl...

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For an electronic copy of this paper, please visit: http://ssrn.com/abstract=1613 Sustainable Use of Renewable Resources l Andrea Beltratti, Graciela Chichilnisky and Geoffrey Hea1 2 April 1996 1 This paper draws heavily on earlier research by one or more of the three authors, namely Beltratti Chichilnisky and Heal [1] [2] and [3], Chichilnisky [7] and [8], and in particular many of the results here were presented in Heal [18]. 2 Beltratti is at the University of Torino and the Fondazione ENI Enrico Mattei, Chichilnisky is UNESCO Professor of Economics and Mathematics and Director of the Program on Information and Resouces (PIR) at Columbia University, and Heal is at the Graduate School of Business and PIR, Columbia University.
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For an electronic copy of this paper, please visit: http://ssrn.com/abstract=1613 Abstract We study paths which involve optimal use of a renewable resource under several alter- native definitions of optimality, including the discounted utilitarian, Chichilnisky's, the Rawlsian and the green golden rule. Initially we consider an economy where the only good is the resource: subsequently we embed the resource in a productive economy with capital accumulation. Our aim is to investigate how the alternative approaches contribute to the understanding of the issues underlying concerns about sustainable use of the earth’s resources. . We show that Chichilnisky's criterion has several interesting characteristics: it leads the economy to asymptote to the green golden rule (the configuration giving the highest sustainable utility level), and requires that the discount rate fall asymptot- ically to zero, which can be interpreted as an application to intertemporal preferences of the well-known Weber-Fechner law of physics and physiology. Key Words: Sustainability, resources, renewable, discounting, JEL Classification: Weber-Fechner law.
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For an electronic copy of this paper, please visit: http://ssrn.com/abstract=1613 1 Introduction We consider here optimal use patterns for renewable resources. JIan Y important resources are in this category: obvious ones are fisheries and forests. Soils. clean water, landscapes. and the capacities of ecosystems to assimilate and degrade wastes are other less obvious examples. 1 All of these have the capacity to renew themselves. but in addition all can be overused to the point where they are irreversibly damaged. Picking a time-path fort he use of such resources is clearly important: indeed. it seems to lie at the heart of any concept of sustainable economic management. We address the problem of optimal use of renewable resources under a variety of assumptions both about the nature of the economy in which these resources are embedded and about the objective of that economy. In this second respect, we are particularly interested in investigating the consequences of a definition of sustainabil- ity as a form of intertemporal optimality recently introduced by Chichilnisky [7], and comparing these consequences with those arising from earlier definitions of intertem-
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This note was uploaded on 10/24/2011 for the course SCIENCE PHY 453 taught by Professor Barnard during the Winter '11 term at BYU.

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ssrn-id1613 - Sustainable Use of Renewable Resourcesl...

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