On the Dynamics of Recycling and Natural Resources

We study the dynamic impact of recycling through its effect on the production set of the economy and its relationship with natural resources. The contribution of renewable and recyclable resources for sustainability is studied. Although in the short run recycling may alleviate resource scarcity, in the long run it is not enough to compensate for the exhaustibility of non-renewable resources and the possibility of obtaining non-decreasing output paths crucially depends on the extent to which production rests on renewable resources. Furthermore, recycling interacts with natural resource growth, surprisingly not always favoring sustainability. The Production and Recycling Function is a generalization of the traditional production function, providing an integrated view of regular production and recycling and representing the production set of the economy when a recycling technology is available.     

Sustainable exploitation of a natural resource: a satisfying use of Chichilnisky’s criterion

Chichilnisky’s criterion for sustainability has the merit to be, so far, the unique explicit, complete and continuous social welfare criterion that combines successfully the requirement of efficiency with an instrumental notion of intergenerational equity (no dictatorship of the present and no dictatorship of the future). But it has one drawback: when applied in the context of renewable resources, and with a constant discount factor, there exists no exploitation path that maximizes this criterion. The present article suggests a way to cope with this problem. The idea is to restrict attention to the set of convex combinations between the optimal discounted utilitarian program and the stationary program leading to the green golden rule. It is shown that an optimal path in this set exists under rather weak sufficient conditions on the fundamentals of the problem. Some ethical properties of this approach are also discussed. In some cases, it turns out that the restricted solution implies no loss of efficiency and benefits intermediate and infinitely distant generations.     

Sustainability,Optimality, and Development Policy

Considering sustainability a matter of intergenerational welfare equity, this paper examines whether an optimal development path can also be sustainable. It argues that the general “zero‐net‐aggregate‐investment” condition for an optimal development path to be sustainable in the sense of the maximin criterion of intergenerational justice is too demanding to be practical, especially in the context of developing countries. It further argues that while the maximin criterion of sustainability may be appealing to the rich advanced industrial countries, for the poor developing countries it implies equalization of poverty across generations, and as such is too costly a moral obligation to be acceptable. The paper suggests that a compromise development policy that follows the optimal growth approach but adopts certain measures to mitigate both the intergenerational and intragenerational welfare inequalities may be more appropriate for these countries. Some of the principal elements of such a policy are highlighted.     

On optimal cycles in dynamic programming models with convex return function

Summary. In this paper we study the behavior of optimal paths in dynamic programming models with a strictly convex return function. Such a model has been investigated in Dawid and Kopel (1997) who assume that the growth of a renewable resource is governed by a piecewise linear function. We prove that in their model the optimal cycles undergo the following qualitative changes or bifurcations: a cycle of period n“bifurcates” into a cycle of period n+1 for increasing elasticity of the return function. We also show that under the assumption of a concave differentiable growth function the qualitative properties of the optimal policy remain valid: oscillating behavior is optimal. Furthermore, we demonstrate numerically that the period of a cyclic optimal path increases if the convexity of the return function (measured by the elasticity) increases. Received: January 22, 1997; revised version: October 13, 1997     

The Great Leap Forward, Economic Reforms, and the Unit Root Hypothesis: Testing for Breaking Trend Functions in China''s GDP Data

This paper has two related objectives. The first is to evaluate empirically whether annual data for China's GDP and its sectoral components from 1952 to 1998 can be modeled more accurately as a stationary process around a breaking trend function as opposed to a unit-root process. The second is to identify the long-run growth path of the Chinese economy and shocks that are big enough to have altered the path. The conclusion that China's major output time series are trend stationary with structural breaks has significant implications for the government in policy decisions for long-run growth and short-run stabilization. It also has implications for modeling comovements between output variables and other macroeconomic variables in cointegration analysis of the Chinese economy.J. Comp. Econom., December 2000, 28(4), pp. 814–827. Department of Commerce, Massey University (Albany), Auckland, New Zealand.     

On the time stability of the output–capital ratio

This paper is concerned with the role of the output–capital ratio in growth models. In the first part we highlight the behaviour of the output–capital ratio along the balanced growth path in the models of Solow [Q. J. Econ. 70 (1956) 65] and Romer [J. Polit. Econ. 94 (1986) 1002]. In the second part we assess the stability of the ratio for some industrial countries.     

Sustainability economics: Where do we stand?

Environmental economics, which is a branch of resource economics – the environment as a scarce resource – is essentially about market failures, the costs of pollution and pollution abatement, and the economics of regulation. Sustainability economics includes the problem of maintaining economic growth, while reducing pollution and/or its impacts, with special attention to the linked problems of energy supply (not to mention the supply other exhaustible resources), climate change and – most urgently – fossil fuel consumption. There is a need for integration of resource and environmental economics under a new rubric, sustainability economics.     

Ill-behaviour of transformation-frontiers with environmental quality versus pollution

If one looks at environmental quality N as a renewable natural resource (with its own natural dynamics) which is changed by emissions Z, then one gets a better understanding of the shape of the damage function. In the case of a logistic growth dynamics one obtains a well-shaped transformation frontier N(Z), even in a two-species natural dynamics. For a more general natural interaction in the framework of a prey-predator model one obtains the possibilities of a cusp catastrophe which makes the transformation frontier N(Z) ill-shaped for the standard arguments of economists and their most favoured environmental policy instruments.     

Sustainable Development,Renewable Resources and Technological Progress

Conflicts between optimality and sustainability are typical in the literature on sustainable development. Using the capital-resource growth model, Pezzey and Withagen (1998, Scandinavian Journal of Economics 100 (2), 513–527) have proved that if natural resources are exhaustible, the time-path of consumption is single-peaked, declining from some point in time onwards. This paper extends the model to include technical progress, resource renewability, extraction costs and population growth. The main result is that, for any constant returns to scale technology, optimal paths can be sustainable only if the social discount rate does not exceed the sum of the rates of resource regeneration and augmentation. The development of resource-saving techniques is crucial for sustaining consumption per capita in the long run, whereas capital depreciation and extraction costs are neutral with respect to this sustainability condition.     

Reconciling sustainability and discounting in Cost–Benefit Analysis: A methodological proposal

The incorporation of the intergenerational equity objective has rendered the traditional Cost–Benefit Analysis (CBA) approach obsolete for the evaluation of projects presenting an important number of environmental externalities and for those whose impacts extend throughout a long period of time.Based on the assumption that applying a discount rate rewards current consumption and, therefore, that it is only possible to introduce a certain intergenerational equity in a Cost–Benefit Analysis, in this work we propose an approach to discounting based on a different rationale for tangible and intangible effects. We designed two indicators of environmental profitability: a) the Intergenerational Transfer Amount (ITA), which quantifies in monetary units what the current generation is willing to pass on future generations when an environmental restoration project is carried out, and b) the Critical Environmental Rate (CER), measures the implicit environmental profitability.These concepts were tested through an empirical case study pertaining to the assessment of an Erosion Control Project in the southeast of Spain. The results yield traditional profitability indicators that are higher — and probably closer — to the real values set by the contemporary society. The information provided by the environmental profitability indicators proposed renders more transparency to the quantification of the levels of intergenerational equity applied, thereby facilitating the difficult reconciliation of the CBA technique with the objective of sustainability.     

Is an Exhaustible Resource Economy Sustainable?

The paper focuses on two alternative concepts of sustainability dominating the literature: (i) maximum permanently maintainable consumption level (Fisherian income) and (ii) the amount of consumption that leaves total value of wealth intact (Hicksian income). In the context of a pure exhaustible resource economy, the author derives an explicit relationship between the two sustainability criteria and shows that while such an economy is not sustainable in the former sense, it is in the latter sense provided social preferences are represented by a logarithmic utility function. The implications of the two concepts for greening of national income are derived. Finally, the paper shows the range of values of the parameters of the model for which the utilitarian optimal path can be close to paths satisfying the alternative sustainability criteria, suggesting that such outcomes are less likely for very poor resource‐dependent countries than for the rich ones.     

Non-linear dynamics of population and natural resources: The emergence of different patterns of development

This paper studies the long-term dynamic interaction between the exploitation of natural resources and population growth. Brander and Taylor [Brander, J.A. and Taylor, M.S. (1998) “The Simple, Economics of Easter Island: a Ricardo–Malthus Model of Renewable Resource Use”. American Economic Review, 88 (1) 119–138.] started a sequence of papers which sought to deduce from historical and archaeological studies some stylized links between ecological and economic systems. In this strand of literature all the services of the natural environment are aggregated in an ecological complex which is characterized by a simple logistic dynamics. Given such assumptions, these models show a unique long-term steady state. The aim of this paper is to obtain a more general framework that could account for the heterogeneity of environmental development paths followed by past societies. Two new assumptions are introduced: i) the disaggregation of the ecological complex into two different resources; ii) irreversibility — namely, an inexorable tendency to exhaustion when the renewable resource stock is below a certain threshold. Analysis of the dynamic properties of the system shows a multiplicity of steady states which makes it possible to consider the effects of technical progress, cultural and climate changes on the resilience of the existing development path.     

Natural resource dependence, non-tradables, and economic growth

I argue that the commonly used nominal measure of natural resource dependence – the share of exports of primary products in GNP – understates in growth regressions the negative link between natural resource dependence and per capita GDP growth. I show that using a purchasing power parity adjusted measure yields an economically much larger negative relationship between per capita GDP growth and natural resource dependence than what has been suggested by the nominal measure. Consistent with the rent-seeking literature, I show that the resource curse is a symptom of societies characterized by high levels of corruption and sluggish checks and balances on political decision-making.     

Endogenous growth and property rights over renewable resources

We study how different regimes of access rights to renewable natural resources – namely open access versus full property rights – affect sustainability, growth and welfare in the context of modern endogenous growth theory. Resource exhaustion may occur under both regimes but is more likely to arise under open access. Moreover, under full property rights, positive resource rents increase expenditures on manufacturing goods and temporarily accelerate productivity growth, but also yield a higher resource price at least in the short-to-medium run. We characterize analytically and quantitatively the model׳s dynamics to assess the welfare implications of differences in property rights enforcement.     

On the dynamics of renewable resource harvesting and pollution control

The paper presents a dynamic partial equilibrium model which combines optimal renewable resource harvesting and optimal pollution control. Pollution accumulates as a slowly decaying stock and is assumed to affect the growth and the quality of the renewable resource stock. The aim is to maximize a social welfare functional which gives the present value of the difference between natural resource benefits and pollution control costs. The existence, uniqueness and the dynamic properties of the steady states are investigated. The analysis also gives a general result concerning the steady state of any two state variable optimal control problems.     

Renewable energy-the path to sustainability

This orticle seeks to address come lingering debates within sustainability studies by revealing the connections between renewable energy consumption and sustainability.Using data from 30 OECD counties,examines the connections via regression and geospattal analysis.Findings from the quantitative analysis indicate that about 50% of the variation in Sustainability is accounted for by the degree of renewables Consumption. The geospatial analysis visuaUv illustrates the intimate connections between the two variables, Theoretically, renewable energy relates to sustainability in three dimensions. The first dimension is economic. Relying on traditional fassil fuels eventually will bring our economy to a stop. Renewable energies, however; are able to secure our energy supply into an indefinite future. The second dimension links to ethics. To leave an intact planet torture generations is a moral responsibity of our generation, The current energy supply system is built on depletion of natural resources, while the sources of renewable energy are vast and constantly replenished. Tire last dimension is ecologic. How to allocate a proper apportionment of the global biosphere between humankind and the other life on the earth is a critical issue related to sustainability. By using renewable energy, we can greatly reduce our impact on biodiversity and therefore strike a balance between humankind and other life. Overall the research suggests that developing renewables can and in many. cases does sustain a nation＇s economic growth while simultaneously protecting the environment. It is a win-win situation. This finding undoubtedly points out a practical and realistic path for sustainable development.     

Renewable enery-the path to sustainability

This article seeks to address some lingering debates within sustainability studies by revealing the connections between renewable energy,consumption and sustainability.Using data from 30 OECD countries,the article amines the connections via regression and geospatial analysis Findings from the quantitative analysis indicate that about 50% of the variation in sustainability is accounted for by the degree of renewables consumption.The geospatial analysis visually illustrates the intimate connections between the two variables.Theoreticallv,renewable energy,relates to sustainability in three dimensions.The first dimension is economic.Relying on traditional fossil fuels eventually will bring our economy to a stop.Renewable energies,however,are able to secure our energy supply into an indefinite future.The second dimension links to ethics.To leave an intact planet to future generations is a moral responsibility of our generation.The current energy supply system is built on depletion of natural resources,while the sources of renewable energy are vast and constantlv replenished The last dimension is ecologic.How to allocate a porper apportionment of the global hiosphere between humankind and the other life on the earth is a critical issue related to sustainability.By using renewable energv,we can greatly reduce our impact on biodiversity and therefore strike a balance between humankind and other life.Overall the research suggests that developing renewables can and in many cases does sustain a nation's economic growth while simultaneously protecting the environment.It is a win-win situation.This finding undoubtedly points out a practical and realistic path for sudtainable development.     

Adjusting Green NNP to Measure Sustainability

Weitzman provides a foundation for NNP as the stationary equivalent of a wealth-maximizing path when there is a constant interest rate and no exogenous technological progress. Here, the implications of Weitzman's foundation are explored in a case encountered in resource models, i.e., the case of non-constant interest rates. In a setting that allows for exogenous technological progress, an expression for NNP is obtained that adjusts Green NNP for anticipated capital gains and interest rate effects to produce a measure that indicates sustainability. This result is important when measuring the relative sustainability of resource rich and resource poor countries.     

PROJECT EVALUATION AND RESOURCE SUSTAINABILITY

This paper outlines a procedure for embodying the principle of resource sustainability in evaluating projects that use significant amounts of natural resources. In this analysis, sustainability requires maintaining the productivity of the resource used over time, either by renewing the resource or by investing its depletion in other capital assets. The basis of a project's evaluation is its net present social value (NPSV), including resource depletion as a social cost. The social cost of depletion is the amount that must be saved and reinvested annually to accumulate a fund that will yield a perpetual annual income equal to the net output lost by resource depletion. By treating resource depletion as a social cost in calculating NPSV, projects causing a high rate of resource depletion receive a relatively low valuation compared with projects causing less resource depletion. Resource depletion includes environmental damage caused by constructing and operating a project, as well as the direct consumption of natural resources.
Several problems arise in reinvesting depletion to preserve the value of a resource base. One major problem relates to the substitutability of man-made capital for natural resources. The conclusion of the analysis here is that society must invest a substantial amount of resource depletion in: (i) replenishing renewable resources, (ii) increasing product output per unit of resource used, or (Hi) increasing the end-use efficiency of resource-intensive products.     

Sustainable management of renewable resources: an experimental investigation in continuous time

This study addresses one of the most basic questions in renewable resource management: the ability of economic agents to exploit a renewable resource in an efficient and sustainable manner. In a laboratory experiment, subjects are presented with renewable resource extraction problems, where optimal management will lead to a stable steady state. A test of sustainability of the extraction practices shows that extraction behaviour results in steady states only 56% of the time. The mode of the steady state distribution coincides with the optimal steady state extraction. The trade-off between accruing a higher payoff in the present and sustaining the resource for future exploitation leads to suboptimal behaviours such as initial overextraction of the resource compared to the optimal extraction policy, costly downward adjustment of the extraction later in time, and settling down for lower long-run resource and extraction. The suboptimal behaviours lead to 17% loss in efficiency on average in terms of the accumulated payoff. We further look at extraction behaviour in terms of the degree of impatience it projects and find, based on their extraction decisions, that most of our subjects seem more impatient in managing their resource than is justified by the decision-making problem presented to them.