the sustainable borders of the state economic crises have historically set the stage for the reconfiguration of the economic borders of the state current concerns focus on debt and associated intergenerational issues such as pensions infrastructure and the environment the sustainable state is designed to put in place a framework for integrating these intergenerational issues alongside the traditional focus on macroeconomic policy static market failures and transfers the building blocks include the accounting framework and in particular a national balance sheet setting out assets and liabilities and providing for capital maintenance over time to support these assets and to provide for sufficient investment the sustainable state requires an appropriate level of savings and institutions to translate these savings into investments two components are the deployment of regulatory asset bases to underpin long term sunk and fixed costs given the time inconsistency problem in government s commitments and the development of financial intermediaries such as an infrastructure bank copyright 2011 oxford university press

degradation of environmental capital and national accounting procedures abstract the capital theoretic approach to the environment as a wastable stock a stock with a flow of abatement services is explored in a simple ricardo like model involving wheat production and pollution production as an essential by product we then turn to how the national accounts are implicit in growth or capital theory models and how formulae emerge for accounting for the wasting of environmental capital airsheds and watersheds from excessive use

potential disasters can turn the tragedy into success this paper presents a novel experimental design that allows testing how users of a common pool resource respond to an endogenously driven drastic drop in the supply of the resource we show that user groups will manage a resource more efficiently when confronted with such a non concave resource growth function compared to groups facing a logistic growth function even among cooperative groups there is a significant behavioral difference although theory predicts there should not be we argue that effectiveness of communication is endogenous to the problem the threat of reaching a critical tipping point beyond which the growth rate will drop drastically triggers more effective communication within the group enabling stronger commitment for cooperation and more knowledge sharing which together explains the results we argue that the insights generated by this study can be seen as one of many but nevertheless important contributions towards an increased understanding of the interactions between human behavior and the environment in common pool resource systems

optimal tax rules and public sector efficiency with an externality in an overlapping generations model abstract this paper examines optimal tax rules and public sector efficiency integrating them in a second best world with pollution by using an overlapping generations model the second best world is characterized by the comparative statics of green preferences the main results obtained are as follows first the marginal cost of public funds may be reduced by the externalities regardless of the choice of taxes second optimal environmental and non environmental tax rules are additively and directly affected by the dynamic efficiency of capital accumulation per unit labour decal and indirectly by it through the efficiency of the public sector environmental taxes going beyond pigovian ones may be welfare improving if the decal is improved by the environmental tax even optimal non environmental tax rules should additively and directly counter the dynamics of pollution to consider the income effects of the optimal tax system for the future third the additivity property or the principle of targeting does not hold even in the absence of incentive compatibility constraints the essential reasons for this are clarified as follows distortions that should be countered by taxes that is the income effects of the optimal tax system and the decal in this model break the equality between optimal environmental taxes and the externalities measured by governments finally growing environmental concerns may in fact increase pollution the inverse relationship between environmental and labour income taxes may not hold

exogenous degradation in the commons field experimental evidence abstract this article presents the results from framed field economic experiments in rural colombia that aim to explore the behavioral responses of resource users to exogenous changes in the availability of a common pool resource in the first 10 rounds of the experiment all subjects played at a baseline with the same initial resource availability in the subsequent rounds the experimenters exogenously changed the resource size including mild and strong reductions in the resource size and rebounds to original size results show that subjects react to strong reductions in resource availability by increasing appropriation from the resource this behavior holds for intense and persistent as well as for progressive reductions in resource availability in addition subjects that experience a reduction in the resource availability followed by a rebound to the initial resource size appropriate more than those subjects who did not experience any change in the resource availability

managing cattle grazing under degraded forests an optimal control approach abstract in this paper aspects of knowledge generation and administration concerning management of a rural enterprise in the argentine chaco region are analyzed the deterioration of natural resources and human living conditions show that forest cattle interaction and the ecological economics of the system are poorly understood or not properly taken into account a methodological solution to a typical decision making problem is proposed here and illustrated by a worked example extracted from a real feasibility study the introduction provides a summary of the natural history and of the human interventions in the region arguments on the roke of silvopastoral systems in reverting forest and soil degradation into sustainable productive undertakings are also exposed the mathematical treatment of the problem follows a system theoretic approach a basic nonlinear model for the dynamics is designed first its simplest version includes three state variables livestock units forest biomass and forage availability and two manipulated variables percentage of female calves sold each year and percentage of the cows that did not give birth during the past period and went for sale states and controls are related by coupled differential difference equations selected results from simulation are shown foundations are also laid for taking into account impulsional controls selective and massive wood extractions forage implantation cattle additions and sales the objective function reflects sustainable development principles it evaluates the process in terms of usual economics and introduces ecological components of the management strategy the total cost is expressed as the accumulation of net expenses made for a fixed number of years minus the sale value of the firm at the end then a dynamic programming scheme is developed for finding optimal trajectories with respect to the basic setup shadow prices for the states are derived from the solution progress towards the building of a decision support system with the preceding elements is reported

second order sustainability conditions for the development of sustainable innovations in a dynamic environment abstract in particular radical innovations can be important means to achieving improved sustainability due to the existence of path dependency and lock in however the transition from one technological trajectory to another more sustainable one is often impeded by significant barriers fortunately these barriers are by their nature subject to substantial changes in time so it makes sense to carefully distinguish between periods of stability showing high barriers in which the given trajectory can hardly be left and periods of instability characterized by low barriers where a new trajectory can be reached more easily the latter distinction matters since sustainable innovations often rely on governmental regulation and the economic burden arising from this regulation will be much lower in periods of instability moreover due to the complexity and dynamics of change in their respective environments innovations are generally associated with fundamental uncertainty such that it becomes impossible to predict the degree of sustainability yielded by specific innovations in the longer run under these circumstances it is essential to facilitate the change between trajectories and to allow for the possibility to select between a variety of alternative trajectories within a process of trial and error sustainability as viewed from this evolutionary perspective is therefore better understood as the general capability to adapt that is to readily change from less to more sustainable technological trajectories since the latter kind of sustainability determines the conditions under which the former kind i e sustainability related to a specific technology can be achieved the two kinds are respectively called second order and first order sustainability finally a series of determinants and corresponding indicators from the techno economic political and socio cultural sphere is identified which after proper measurement and weighting allow for making an assessment whether and when the incumbent industry is sufficiently destabilized and the political system rendered sufficiently favorable to the new more sustainable technology such that a transition to the preferred trajectory is possible without too much effort

linking economic and ecological models for a marine ecosystem increasingly economists and ecologists have begun to recognize the value to public policy of combining information and results from each discipline into multidisciplinary studies here we present a methodological approach that links economic and ecological analyses we develop an economic ecological model by merging an input output model of a coastal economy with a model of a marine food web we describe distinct linear system sub models of the economy and the ecosystem and we develop a method for linking the two our method extends the work of earlier researchers by incorporating an ecosystem matrix into resource multipliers and by showing how these multipliers may be calculated we present a numerical example for the new england region using coastal economic and marine ecological data from the region for a restricted set of industry sectors and food web trophic levels we calculate resource multipliers for the example and we simulate the economic impacts of changes in primary production in the ecosystem on final demands for fishery products the results illustrate the effects of incorporating the impacts of habitat destruction and ecosystem structure on resource multipliers our approach can be extended to incorporate the full range of sectors in the economy and trophic levels in a linked ecosystem 2003 elsevier b v all rights reserved

flows of air pollution ill health and welfare we provide a theoretical framework for measuring welfare when pollution influences economic growth by impairing health and driving up defensive medical expenditures we demonstrate the usefulness of our framework in practice by applying it to data from swedish valuation studies designed according to the accounting principles suggested here we estimate that the negative health effects of nitrogen dioxide emissions amount to 0 6 of gdp in sweden we also show that a corrective pigouvian tax should internalize the direct disutility reduced labor productivity and increased healthcare expenditures caused by pollution according to our calculations harmful health impacts alone excluding ecosystem effects justify 65 of the current swedish tax on nitrogen dioxide

accounting for the value of ecosystem services abstract a value of ecosystem services ves may be calculated by multiplying a set of ecosystem services by a set of corresponding shadow prices this paper examines the role of the ves concept in measuring trends in human well being under conventional arguments from applied welfare economics standard measures of market consumption may be extended to include the value of direct environmental services which affect welfare in ways that are not mediated by the consumption of purchased goods the ves concept does not capture values such as ecological sustainability and distributional fairness that are not reducible to individual welfare and its operationalization is constrained by the well known limitations of nonmarket valuation methods nonetheless attempts to calculate the value of environmental services can provide insights into the tradeoffs between market activity and environmental quality that are implicit in the process of economic growth such efforts can promote informed debate concerning the achievement of sustainable development

optimal dutch disease growth models of the dutch disease such as those of krugman 1987 matsuyama 1992 sachs and warner 1995 and gylfason et al 1999 explain why resource abundance may reduce growth however the literature also raises a new question if the use of resource wealth hurts productivity growth how should such wealth be optimally managed this question forms the topic of the present paper in which we extend the growth literature on the dutch disease from a positive to a normative setting we show that the assumptions in the previous literature imply that the optimal share of national wealth consumed in each period needs to be adjusted down however some dutch disease is always optimal thus lower growth in resource abundant countries may not be a problem in itself but may be part of an optimal growth path the optimal spending path of the resource wealth may be increasing or decreasing over time and we discuss why this is the case

social accounting and welfare measurement in a growth model with human capital this paper addresses social accounting and welfare measurement in an economy where human capital is an important factor in the economic system human capital accumulation depends on the time consumers spend in education however human capital is also a separate argument in the production function facing firms which gives rise to a production externality in a command optimum where the externality is internalized we show that an augmented nnp measure is the appropriate welfare indicator we also discuss the taxtransfer system required for the decentralized economy to reach a command optimum

economic growth pollution and renewable resources abstract this paper first analyzes a model of economic growth with stock pollution allowing smooth substitution between emissions and reproducible capital when emissions are optimally controlled the steady state consumption is lower than without pollution control but the optimal steady state equilibrium may not exist if the marginal productivity of capital is bounded the steady state is shown to be a local saddle point independent of the rate of discount if pollution is not controlled a competitive economy moves along a stable growth path toward a too heavily polluted steady state next a growth model in which pollution affects the growth of renewable resources is presented the conditions for the existence and saddle point property of the steady state are given and the consequences of nonoptimal externality taxes are discussed when renewable resources are included higher than optimal pollution may decrease steady state consumption contrary to the case where renewable resources are ignored

air pollution and green accounts a simple model treating air emissions as cumulative pollutants is used to derive measures of green net national product the model implies that pollution emissions are properly valued at their marginal social costs in the measurement of green nnp the level of genuine savings net savings less the value of resource depletion and pollution emissions is shown to provide a useful indicator of sustainable development recent figures on the social costs of fuel cycles are used to derive genuine savings measures for the uk and other european nations several countries had negative genuine savings during the 1980s

health effects and optimal environmental taxes abstract the literature on environmental taxation in the presence of pre existing distortionary taxes has shown that interactions with these distortions tend to raise the cost of an environmental tax and thus that the optimal environmental tax is less than marginal environmental damages a recent paper by schwartz and repetto 2000 challenges this finding arguing that the health benefits from reduced pollution will also interact with pre existing taxes and may cause the optimal environmental tax to exceed marginal damages schwartz and repetto s analysis represented health effects implicitly in the utility function in contrast the present paper explicitly represents health effects in an analytically tractable general equilibrium model this model shows that interactions with health effects from pollution actually will tend to reduce the optimal environmental tax contradicting schwartz and repetto s conclusion this demonstrates the usefulness of explicitly modeling health effects and it reinforces the general notion that tax interactions tend to raise the costs of an environmental tax

environmental versus human induced scarcity in the commons do they trigger the same response we study appropriation strategies in common pool resources where extinction is a credible threat here we present an experimental study of the appropriation of common pool resources in a dynamic setting where resource availability depends on the initial environmental characteristics of the common resource and on human induced resource depletion due to users appropriation patterns our results show that initial resource scarcity limits appropriation by inducing an initial caution among users that persists throughout of the game additionally we find that subjects restrain their appropriation strategies when scarcity increases however this concern for resource scarcity is not enough to prevent resource depletion agents do not counteract the previous rounds appropriation strategies but follow the appropriation trend high appropriation levels are followed by higher appropriation strategies thus promoting the well known tragedy of the commons often concern for resource preservation is not great enough to limit appropriation

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

the money supply process under alternative federal reserve operating procedures an empirical examination increasing reliance on the monetary aggregates as indicators of economic activity in conducting monetary policy led the federal reserve to change its operating procedure in october 1979 in an attempt to gain greater control over the monetary aggregates the fed switched from using the federal funds rate as its operating instrument to operating by means of nonborrowed reserves subsequent increased volatility in interest rates coupled with sharp fluctuations in money growth and economic activity led the fed to modify its procedure once more in the autumn of 1982 switching its operating target from nonborrowed to borrowed reserves this paper examines empirically the money supply process from 1970 to 1986 we find that the process itself was not invariant to the fed s changes in operating procedure thus the effect of these changes did not lead to more or less control of money by the fed under the same money supply process rather the changes in the fed s procedure led to changes in the money supply process which in the case of the first change in procedure at least largely thwarted the aims of the fed regarding money control we show that the switch to a reserves operating procedure which has since been modified but not completely abandoned has failed to overcome the short run endogeneity or demand determination of money which the fed had experienced prior to october 1979 because the banking system has changed its behavior with respect to the link between reserves and money supply under the newer procedure

intertemporal equity and efficient allocation of resources abstract competitive paths which are efficient are shown to satisfy a terminal cost minimization condition thereby providing a continuous time counterpart to the discrete time result due to malinvaud using this result competitive paths which are equitable and efficient are shown to satisfy hartwick s investment rule which states that the value of net investment is zero at each date our result indicates that hartwick s rule can help to signal inefficiency of competitive equitable paths journal of economic literature classification numbers c61 d90 o41

environmental issues and economic decisions in developing countries abstract this paper explains the key role of environmental economics in incorporating environmental concerns into decision making and in facilitating the more efficient management of natural resources as a step toward sustainable development it reviews concepts and techniques for valuation of environmental impacts for use in conventional cost benefits analysis as well as key related aspects including environmental impacts of economywide policies multicriteria analysis risk and uncertainty and discount rate issues several developing country case studies are summarized which cover a range of practical valuation methods the evidence presented suggests that the valuation techniques for determining use values may be applied successfully in appropriate cases but examples involving nonuse values are rare the use of multiobjective desicion methods also needs to be explored where economic valuation is not feasible

international trade and the sustainability footprint a practical criterion for its assessment a simple and minimal criterion for sustainability is that the value of natural capital plus manufactured capital be not decreasing on the basis of any individual country or region the above simple comparison may be misleading as it does not take account of the production of goods for consumption in other countries regions via international trade in other terms the full environmental footprint of a country may not be properly assessed a method of calculating a weak sustainability criterion has been established for both a closed economy approach and an open economy approach there are significant differences between the open and closed economies measures for several regions particularly the middle east overall global sustainability on this criterion has been positive and increasing using a difference equation approach a further analysis has been made of the average proportional rate of change of global sustainability between 1980 and 1990 and its various regional and structural components have been determined these indicate that most of global sustainability growth can be attributed to western europe other asia and japan particularly through high savings ratios the usa on the other hand has made a very small net contribution to the growth in global sustainability

discounting of long term costs what would future generations prefer us to do decisions with intergenerational consequences may leave future generations worse off i e not be pareto optimal if costs and benefits are not discounted correctly we point out that this happens if the conventional social discount rate is applied to intergenerational costs with that rate the justification of intergenerational costs benefits of a project are invested and the proceeds can cover future costs leads to an inconsistency over the long term eventually the supposed benefits of any project become larger than the entire gnp the conventional approach commits an error by treating the time preference component of the discount rate as if it represented creation of wealth while it really involves only redistribution the time horizon of the redistribution is limited by the duration of market transactions especially loans thus we recommend a two step discounting procedure with the conventional social discount rate for the short term about 30 years and the growth rate of the economy for the long term data for gnp per capita growth in the us the uk france germany japan and the soviet union since the industrial revolution combined with data for net economic welfare per capita suggest an intergenerational discount rate in the range of 1 to 2 for practical application the rate at which costs and benefits will grow over time is just as important as the discount rate only the difference between these two rates matters for many environmental costs these rates may be close to each other during the next few generations this implies that some of the uncertainty in the prediction of rates cancels and one can treat the problem as if the effective rate were close to zero the consequence for costs such as global warming or nuclear power can be very significant the valuation can increase by more than an order of magnitude compared to values based on conventional discounting

measuring the depreciation of australia s non renewable resources a cautionary tale abstract the pursuit of sustainability is widely seen as requiring the calculation and publication of environmentally adjusted measures of national income and or of economic indicators intended to show whether or not economic behaviour is consistent with sustainability requirements in either case a measure of natural resource depreciation is needed the paper restricts its attention to non renewable mineral resources and measures their depreciation in australia according to different methods proposed in the literature using data published by the australian bureau of statistics the different methods are found to yield strikingly different results the conclusion is that robust measurement of natural resource depreciation is unlikely and that results appertaining to such should be treated sceptically

pollution tax design and green national accounting abstract this paper concerns social accounting when pollution gives rise to a consumption externality the purpose of the paper is to reconcile the willingness to pay technique as a means of collecting information put forward in earlier studies with the growth theoretical approach to social accounting this is accomplished by designing approximations of pigouvian emission taxes on the basis of currently available willingness to pay information the paper analyses the welfare effects of these taxes as well as to what extent they can be used to measure approximately the value of depletion of environmental capital in the national accounts

the sustainable residential water use sustainability efficiency and social equity the european experience abstract the present paper traces the operational conditions governing the sustainable use of water in cities towards this objective the paper first proposes a new comprehensive definition for the sustainable use of water next efficiency in use is proposed as a fundamental instrument in achieving sustainability in spite of prevailing opinions maintaining that sustainability and efficiency aim at different and probably conflicting objectives in this light several pricing modes that inhibit efficiency are examined and their effects are defined in this context egalitarian pricing which nevertheless prevents efficiency is also systematically evaluated until it is ascertained that it does not serve social equity in the use of water in the long run all the more the present paper advocates that certain egalitarian pricing systems such as the increasing block rates most prevalent at this time may have the reverse effect than the one intended and hence in the long run impose negative impacts on the welfare of low incomes as a result full cost prices are proposed as a necessary instrument for the sustainable use of water an instrument that promotes social equity in the long run the assumptions of the study are examined in a comparative analysis of representative european pricing systems and urban management modes

negative externalities in cropping decisions private versus common land this paper analyzes to what extent the entitlement of property rights affects cropping decisions when these decisions generate negative externalities to that end we implement an experimental study where agents make cropping decisions in two different treatments private and common land the results show that there are no statistically significant differences between the two treatments in the contribution to the negative externality thus revealing that the entitlement of property rights does not affect cropping decision in this context furthermore our findings indicate that the implication of the agents in activities generating negative externalities tends to increase over time thus amplifying its adverse consequences

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

net national product as an indicator of sustainability net national product nnp can potentially serve several objectives among others to measure value added and to be an indicator of welfare in the aftermath of the world commission on environment and development however it also seems important to investigate whether the concept of nnp can serve as an indicator of sustainability my point of departure following hicks 1946 ch 14 is therefore to require that nnp should measure what can be consumed in the present period without reducing future consumption possibilities and in line with this to argue that the nnp should equal the maximum per capita consumption level that can be sustained if sufficiently many facilitating assumptions are made then a concept of nnp that serves as an exact indicator of sustainability can easily be constructed for instance for a closed economy with a constant population a stationary technology and with only one capital good it follows that the present does not reduce future consumption possibilities if and only if it does not decrease the stock of the single capital good hence under the assumption that the one capital good k is identical to the one consumption good x nnp defined as y x k measures the maximal sustainable consumption at time t because then x y is equivalent to k the purpose of this note is to establish that with multiple capital goods it is not in general possible to construct an exact indicator of sustainability on the

on the formation of expected inflation under various conditions some survey evidence based on the notion of economically rational expectations the author hypothesizes that the degree of the rationality of economic agents inflationary expectations differs depending on the prevailing rate and volatility of inflation this is tested for the institute for social research monthly survey data by using the inflation forecasts from an autoregressive integrated moving average model and those from a vector autoregressive model respectively as benchmarks for the weak and stronger measures of rationality the author s analysis for 1978 01 1985 06 reveals evidence in favor of the above hypothesis copyright 1992 by university of chicago press

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

are survey forecasts of macroeconomic variables rational this article examines the rationality of forecasts of 11 macroeconomic variables among the nonstationary series only surveys of housing starts the unemployment rate and the trade balance are rational forecasts among the stationary series survey forecasts for only consumer prices and personal income are consistent with rational expectations lack of rationality in forecasts of durable goods industrial production leading indicators money supply and retail sales suggests that such forecasts do not fully exploit public information indeed survey forecasts for industrial production and retail sales can be improved significantly with past information copyright 1995 by university of chicago press

sustainable farm income in the presence of soil erosion an agricultural hartwick rule soil erosion is a physical and economic problem of natural capital degradation even along an intertemporally efficient trajectory one can have in a loss of soil fertility and a continuous decline of agricultural net revenue moreover soil erosion is a major source of surface water pollution in rural areas erosion control is thus a challenge for sustainable resource management and internalizing external effects to sustain the level of farm income an agricultural hartwick rule is proposed which addresses both on farm and off farm effects of soil erosion first it requires the investment of the soil rents into alternative capital second additional measures are required to comply with an ambient quality target a charge subsidy scheme proves the most adequate from a perspective of cost effectiveness and sustainability if effluent charge revenues are earmarked to subsidize cropland retirement at the watershed scale in combination with the investment of soil rents this enables to maintain the level of farm income constant over time while respecting the ambient quality target altogether this fulfills the requirements of efficiency and sustainability 2003 elsevier science b v all rights reserved

the greenhouse effect and intergenerational transfer abstract the scientific basis for understanding the economic issues involved in the greenhouse effect is outlined four important aspects of the problem are identified and discussed irreversibility international and institutional constraints uncertainty and intergenerational equity attention is focused upon the intertemporal choice problem a model describing the potential for intergenerational transfers under the uncertainty of climatic change due to fossil fuel combustion is presented we conclude intergenerational compensation can be achieved by investment in capital or technology or by bequest and is ethically required regardless of any other action

wealth from optimal health abstract recently much research has been devoted to the question of how the conventional net national product measure should be augmented so as to cover changes in the stocks of natural resources this paper investigates the treatment of health capital and the risk of doomsday caused by pollution in such welfare measures our problem is not a standard optimal control problem because the survival probability depends on state variables we show how to handle this complication the resulting welfare measure is contrasted with the conventional net national product measure finally we address the matter of how to design a subsidy on health investment such that a market economy provides the optimal level of health

savings growth and the resource curse hypothesis an important connection between recent attempts to understand the determinants of economic growth and the measurement of sustainability is the finding of a negative and significant relationship between natural resource abundance and economic growth this is the so called resource curse hypothesis using cross country regressions we offer evidence that the curse may itself be a manifestation of the inability of governments to manage large resource revenues sustainably in particular these results offer another perspective on the resource curse hypothesis the countries where growth has lagged are those where the combination of natural resource macroeconomic and public expenditure policies have led to a low rate of genuine saving net saving adjusted for resource depletion

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 i introduction how should net national product nnp be adjusted for the depletion of natural and environmental resources a prerequisite for examining this problem is to decide on an underlying notion of income at the personal level hicks 1946 defines income as the consumption that if kept constant would yield the same present value as a person s actual future receipts since market prices are not influenced by any single person this notion of income equals a person s maximal sustainable consumption at the national level national income can likewise be defined as the consumption that if kept constant would yield the same present value as the actual future consumption path unless the nation is a small open economy faced with given international prices this notion of national income will exceed

a contribution to the theory of welfare accounting a kind of unified theory is proposed as a dynamic generalization of the standard consumer surplus methodology for evaluating welfare changes the unified theory allows rigorous dynamic welfare comparisons to be inferred between any two economic situations from just knowing current incomes and observing a short run market demand schedule essentially the change in present discounted future utility is exactly captured by the formula difference in current income plus consumer surplus this well known formula is thereby shown to cover a far wider class of welfare comparisons than is customarily treated in the textbook static case

intertemporal equity and hartwick s rule in an exhaustible resource model in a standard exhaustible resource model it is known that if along a competitive path investment in the augmentable capital good equals the rents on the exhaustible resource known as hartwick s rule then the path is equitable in the sense that the consumption level is constant over time in this paper we show the converse of this result if a competitive path is equitable then it must satisfy hartwick s rule

a disinflation trade off speed versus final destination i introduction whether or not expectations of inflation are rational is an open question rational forecasts require knowledge and information that some agents may not find worthwhile acquiring instead because past inflation is a cheap and potentially informative signal about the policies of the central bank those agents with less information may resort to extrapolation from past inflation to a greater extent than those with more information in other words for all agents expectations have a rational forward looking and an adaptive backward looking component differences across agents in terms of information can lead to a separation between those who form more rational and those who form more adaptive expectations 1 a simpler heterogeneity agents with purely rational or with purely adaptive expectations has been adopted in some models 2 in that context when a central bank is the major source of information about monetary policy it could potentially influence the proportion of agents in each group a natural question is what are the central bank s preferences regarding the distribution more specifically does the central bank prefer many or few agents with rational expectations when introducing a monetary regime designed to reduce inflation we will analyze the properties of a barrogordon 1983a model of monetary policy in which some agents form rational and some adaptive expectations in that setting a higher proportion of agents with adaptive expectations generally slows down the disinflation process but as in sargent 1999 it also allows for a lower long run inflation rate an implication of this is that the central bank will prefer a higher proportion of agents who form rational expectations if it disinflates from a high level of inflation but not so if it disinflates from a moderate or low inflation level it is generally recognized that expectations do not adjust instantaneously to reflect the new conditions following a change in monetary regime instead as in lewis 1989 wieland 2000 and mankiw et al 1987 agents including the central bank observe the unfolding macro developments and form estimates of the parameters that characterize the new environment a number of interesting questions are addressed in that set up what is the speed and correctness of learning can the central bank use its control over monetary aggregates to generate observations useful in the learning process that is can learning be an active process when does equilibrium have an inflationary bias the structure of our model is simpler in the sense that the central bank has direct control over inflation and aside from a random shock the output response to changes in prices is clear the simpler set up makes the model analytically tractable and allows us to solve explicitly for steady state inflation and a parameter that captures speed of convergence of inflation to the steady state we can compare our results with the numerical estimates of other more complicated models most notably that of sargent 1999 our explicit solution helps clarify insights about the dynamics of disinflations models of parameter uncertainty and learning have also addressed questions about gradual versus rapid disinflation with results similar to ours balvers and cosimano 1994 find that rapid disinflation is preferred when inflation is high although in their framework rapid reduction in money growth is warranted to facilitate learning in our model rational agents are preferred because with high initial inflation the benefit from rapid disinflation with more rational agents outweighs the cost of higher steady state inflation similar to cukierman and meltzer 1986 and cosimano and van huyck 1993 in our model there is a possibility for the central bank to influence the beliefs of the population the process of expectation formation however is not modeled formally which contributes substantially to the analytical tractability of the model

environmental equity and sustainability rejecting the kaldor hicks criteria abstract an implementable translation of environmental equity and sustainability is provided for use in benefit cost analysis as such the approach builds on the underlying economic structure of benefit cost analysis while trying to cause it to evolve in ways that take into account issues of greater concern to ecological economists environmental equity and sustainability are interpreted as imposing new decision criteria that require additional benefit cost tests based on actual compensation to identified sub groups of the population this rejects the pre world war ii compromise of economists regarding potential compensation embodied in the kaldor hicks criteria for environmental equity a project is proposed to pass a benefit cost test if the identified group either receives net benefits or is more than compensated for its losses for sustainability a project is proposed to pass a benefit cost test if the compensation is larger than the net value of the resource and the net value of the resource is reinvested

health nutrition and economic development the relationship between health and economic development is explored focusing on nutrition based health indicators the spotlight is placed on the inter related feedbacks between the influence of health on productivity on one hand and the influence of income on health status on the other disentangling causality in these relationships has preoccupied much of the literature we evaluate different empirical strategies that have been adopted and assess the results there is now a body of evidence based on careful empirical studies that demonstrates a causal relationship between health and labor productivity there is also evidence that at least among the very poor additional income is spent on improved nutrition there are two issues that have received little attention although we argue they are likely to be very important first measurement of health is discussed in detail evidence is presented on how taking into account differences in the extent of measurement error is critical for interpreting the impact of health on wages the same theme emerges in studies of the effect of income on health specifically calorie intake the key role of non linearities in these relationships is highlighted and we demonstrate that a good deal of the variation in estimates of income elasticities of demand for calories can be ascribed to the role of measurement and functional form authors

dutch disease and the mitigation effect of migration evidence from canadian provinces this article evaluates whether immigration can mitigate the dutch disease effects associated with booms in natural resource sectors we derive predicted changes in the size of the non tradable sector from a small general equilibrium model a la obstfeld rogoff using data for canadian provinces we find evidence that aggregate immigration mitigates the increase in the size of the non tradable sector in booming regions the mitigation effect is due mostly to interprovincial migration and temporary foreign workers there is no evidence of such an effect for permanent international immigration interprovincial migration also results in a spreading effect of dutch disease from booming to non booming provinces

national account of timber and forest environmental resources in sweden this paper outlines an extension of the national account of income from forest resources in sweden 1987 incorporating changes in timber inventories production of nonmarketed timber and nontimber goods and depletion or improvement in vital environmental stocks such as soil nutrients biodiversity and carbon sinks the total net value added provided by forest resources and forestry labour 1987 is estimated to 22 billions sek this is one third more than the contribution of forestry to ordinary gnp

deforestation and national accounting we construct a first best growing economy in which land is being switched continuously from use in forestry to an alternative use we find that implicitly for such activity to take place there must be no net loss to land owners this implies no deduction in the national accounts for deforestation with soil erosion on deforested land pigovian taxes must be levied to sustain a first best we also observe an optimal tax on households for their implicit use of forests as oxygenation sinks

natural resources national accounting and economic depreciation abstract the current value hamiltonian in an aggregate optimal growth problem with heterogeneous capital stocks including exhaustible renewable and environmental stocks is the nnp function routine substitutions reveal that the using up of natural resource stocks is representable as easy to interpret economic depreciation magnitudes we obtain true nnp inclusive of natural resource stock diminution implications for actual national accounting practices are also discussed

the capital gains from trade are not enough evidence from the environmental accounts of venezuela and mexico abstract in principle a country cannot endure negative genuine savings for long periods of time without experiencing declining consumption nevertheless theoreticians envisage two alternatives to explain how an exporter of non renewable natural resources could experience permanent negative genuine savings and still ensure sustainability the first one alleges that the capital gains arising from the expected improvement in the terms of trade would suffice to compensate for the negative savings of the resource exporter the second alternative points at technological change as a way to avoid economic collapse this paper uses the data of venezuela and mexico to empirically test the first of these two hypotheses the results presented here prove that the terms of trade do not suffice to compensate the depletion of oil reserves in these two open economies

capital gains and net national product in open economies it is shown within a given framework that with the world economy following an egalitarian path the aggregate capital gains being positive is equivalent to the interest rate tending to decrease this result is of importance for the concept of net national product in open economies in particular with positive aggregate capital gains an open economy cannot sustain consuming the return on its capital stocks since some part of the return must be used to augment the country s national wealth it is established that a country s share of world wide sustainable consumption equals its share of worldwide wealth

intergenerational altruism and the environment we construct an overlapping generations model of pollution externality in which individuals are altruistically linked to their offspring as in barro 1974 it is shown that steady state consumption may be a decreasing function of the intergenerational degree of altruism despite individuals altruism the competitive equilibrium is not optimal we thus study the social optimum and show that it can be decentralized

resource depletion and sustainability in small open economies abstract exogenous price changes affect the amount that a small country exporting natural resource commodities must invest to sustain its consumption level the necessary amount is given by the difference between hotelling rent and the discounted sum of future terms of trade effects capital gains the latter term is found to be large relative to the former in the case of petroleum depletion in indonesia this suggests that resource rich countries will need to invest more than previously expected to sustain their consumption levels if natural resource prices continue their long term historical decline

benefit transfer in europe how reliable are transfers between countries the benefits for specific health impacts related to air and water quality were measured in simultaneous contingent valuation surveys conducted in five different european countries consistent inter country differences in willingness to pay to avoid ill health episodes could not be explained by measurable differences in individual characteristics international transfer of unit values resulted in an average transfer error of 38 accounting for measurable differences among countries in health status income and other demographic measures either through ad hoc adjustments to the transferred values or through value function transfer did not improve transfer performance

mitigating the tragedy of the commons through cooperation an experimental evaluation abstract in a commons each firm s costs rise with industry output this externality can be mitigated if firms jointly restrict harvests but higher prices result repeated interaction usually facilitates cooperation that lowers harvest rates increased cooperation suggests there should be more firms in the socially optimal market structure using experimental markets with two to five firms we observe the influence of industry size on harvest rates cooperation increases the socially optimal number of firms in markets when there are static externalities but not for dynamic externalities finally even when the initial stock is low there is little tendency toward resource extinction

modeling the effects of health on economic growth abstract this paper investigates the effects of health indicators such as adult survival rates asr on gdp growth rates at 5 year intervals in several countries panel data were analyzed on gdp series based on purchasing power adjustments and on exchange rates first we developed a framework for modeling the inter relationships between gdp growth rates and explanatory variables by re examining the life expectancy income relationship second models for growth rates were estimated taking into account the interaction between asr and lagged gdp level issues of endogeneity and reverse causality were addressed lastly we computed confidence intervals for the effect of asr on growth rate and applied a test for parameter stability the results showed positive effects of asr on gdp growth rates in low income countries

empirical testing of genuine savings as an indicator of weak sustainability a three country analysis of long run trends genuine savings has emerged as a widely used indicator of sustainable development this approach to conceptualising what sustainability is about has strong links to work published by anil markandya and colleagues over 20 years ago in this paper we use long term data stretching back to 1870 to undertake empirical tests of the relationship between genuine savings gs and future well being for three countries britain the usa and germany our tests are based on an underlying theoretical relationship between gs and changes in the present value of future consumption based on both single country and panel results we find evidence supporting the existence of a cointegrating long run equilibrium relationship between gs and future well being and fail to reject the basic theoretical result on the relationship between these two macroeconomic variables this provides some support for the gs measure of weak sustainability

long term substitutability between environmental and man made goods abstract substitutability between environmental and man made goods plays a major role in the sustainability debate the notion of substitutability covers a continuous spectrum with perfect substitutability at one end and poor substitutability at the other in this paper it is shown that if economic growth sustains a sharp distinction emerges between perfect and poor substitutability without any intermediate interpretation of substitutability if poor substitutability prevails environmental resources will eventually constitute the major part of total consumption value we relate our results to baumol s disease and assess the implications of this phenomenon for the compensation of environmental losses

comparing regulations to protect the commons an experimental investigation in a laboratory experiment we test three regulations imposed on a common pool resource game with heterogeneous users an access fee and subsidy scheme transferable quotas and non transferable quotas we calibrate the game so that all regulations improve users profits compared to free access extraction we compare the regulations according to five criteria resource preservation individual profits profit difference pareto improvement from free access and sorting of the most efficient users one of the main findings is that even though it performs better in sorting out the most efficient subjects the fee and subsidy scheme is not more profitable than tradable quotas

an overlapping generations model of growth and the environment this article analyzes the potential conflict between economic growth and the maintenance of environmental quality in an overlapping generations model short lived individuals make decisions which have long lasting effects on both factor productivity and the environment the model provides a theoretical explanation of observed correlations between environmental quality and income whereby economic growth is associated first with declines then improvements in environmental quality it suggests circumstances in which multiple pareto ranked steady state equilibria may arise and in which sustained growth of both capital and environmental quality may occur overmaintenance of the environment analogous to dynamically inefficient overaccumulation of capital may emerge copyright 1994 by royal economic society

irreversibility and uncertainty cause an intergenerational equity efficiency trade off abstract two important policy goals in intergenerational problems are pareto efficiency and sustainability i e intergenerational equity we demonstrate that the pursuit of these goals is subject to an intergenerational equity efficiency trade off our analysis highlights two salient characteristics of intergenerational problems and policy i temporal irreversibility i e the inability to revise one s past actions and ii uncertainty of future consequences of present actions in human environment systems we employ a two non overlapping generations model that combines an intragenerational production decision on the use of circulating capital and a non renewable resource with a negative intergenerational externality as an unforeseen contingency if initially unknown problems become apparent and policy is enacted after irreversible actions were taken policy making faces a fundamental trade off between ex post pareto efficiency and sustainability that is one can achieve either one of these two goals but not both

predicting gasoline prices using michigan survey data abstract this study investigates the predictive power of michigan surveys of consumers msc data for gasoline prices specifically we utilize the msc data on both expected inflation and consumer sentiment to construct a vector autoregressive var model for forecasting gasoline prices for 2003 2014 our findings indicate that the var forecasts are superior to the comparable benchmark forecasts obtained from a univariate integrated moving average ma model in terms of both predictive information content and directional accuracy as such we conclude that the msc data on both expected inflation and consumer sentiment have significant predictive information for gasoline prices further inspection reveals that the var forecasts are particularly accurate for the period since 2008 reinforcing the notion that consumers are economically rational