The Under-Exploitation of Natural Resources: A Model with Overlapping Generations*

It is well known that competitive markets may fail to generate an optimal rate of extraction of a natural resource-stock. The barrier to optimality may be uncertainty about tenure, commonality of property rights in the resource, or uncertainty about the extent of the resource. In all these cases, suboptimality takes the form of over-extraction. We draw attention to an additional source of suboptimality. In an economy with overlapping generations, the resource-stock plays the double role of repository of savings and source of productive inputs. The decline in the supply of the resource-stock may eventually force its price so high that it ceases to perform its second function. Extraction comes to an end even though the resource has a positive marginal productivity in producing consumption goods. This is inefficient, hence suboptimal. This time, however, suboptimality takes the form of under-extraction.     

Utility theory based on rational probabilities

Classical utility theory assumes that a preference order is defined for all mixtures αa+(1?α)b of pure prospects a,b for all real numbers α between 0 and 1. If α is irrational such mixtures are hard to interpret intuitively. We show here how to modify the usual axiomatisations to deal with the case where α is restricted to rational values, or even further to values of the form m/2ⁿ corresponding to mixtures built up from even bets.     

A note on cross-impact analysis: a calculus for sequence-dependent events

As the example presented demonatrate, the analysis of cross-impactss amount a group of related events is somewhat more complex than perhaps heretofore imagined. Impacts of effects between such events very often carely depend on their temporal sequence. The event outcome space is accordingly multiplied considerably over the case where such dependency is ignored. The result is that high premium is placed on methods that seek to reduce analytical complexity without distorting essential event intrications.     

Consumer-centered vs. job-centered health insurance

Most employees and their dependents in the United States have health insurance provided by the employer or labor-management health and welfare fund. In this system, employees and their families lose their health insurance when the breadwinner loses his or her job while, at the same time, a Medicaid beneficiary can lose Medicaid eligibility by getting a job, even a poorly paid one. Most health insurance pays the doctor on the basis of fee-for-service and the hospital on the basis of cost-reimbursement, rewarding both with more revenue for providing more and more costly services. The insured employee has little or no incentive to seek out a less costly provider. There are no rewards for economy in this system. It should be little wonder, then, that health care costs are out of control. There are alternative financing and delivery systems with built-in incentives to use resources economically, but, the author of this article asserts, their ability to compete and attract patients with their superior economic efficiency is blocked by many laws and government programs. The author believes that the most effective and acceptable way to get costs under control, and at the same time achieve universal coverage, would be through a system of fair economic competition. He discusses his Consumer Choice Health Plan proposal and describes how one of the main barriers to competition is today's system of job-linked health insurance.