How could the non-sustainable Easter Island have been sustained?
C.Y. Cyrus Chu,
Ching-chong Lai and
Chih-Hsing Liao ()
International Review of Economics & Finance, 2014, vol. 34, issue C, 161-174
The collapsing scenario of Easter Island has been analyzed by Brander and Taylor (1998) as a predator–prey model in a Malthusian world, in which the household is only concerned with its instantaneous utility. This paper develops an endogenous growth model with a renewable resource and analyzes the possibly non-sustainable growth as a steady state, in spite of the household being deeply concerned with all its future lifetime utility. Our analysis shows that the ignorance of future lifetimes in present decision-making is indeed crucial to economic non-sustainability. We then examine whether a deforestation tax set by the government could have reduced the resource exploration rate and thereby held back the economic collapse. We also demonstrate using phase-diagrams how such a tax can switch the economic dynamics from non-sustainability to sustainability.
Keywords: Endogenous growth; Environmental policy; Renewable resources (search for similar items in EconPapers)
JEL-codes: H23 O40 Q23 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:34:y:2014:i:c:p:161-174
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