EconPapers    
Economics at your fingertips  
 

Optimality, Hartwick’s Rule, and Instruments of Sustainability Policy and Environmental Policy

John Pezzey

No 125833, 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia from Australian Agricultural and Resource Economics Society

Abstract: We consider a closed, constant-technology, capital-resource economy with resource stock amenity value, which would otherwise aim for conventionally, PV-optimal development that maximises the present value of utility using a constant discount rate. In this economy, we calculate the decentralised policy instruments needed to achieve continuously zero net investment, and hence (by Hartwick’s rule) sustainability in the form of constant utility. We also calculate the environmental policy needed to internalise the resource’s amenity value: its natural form is a subsidy on holding the stock. The sustainability policy comprises this stock subsidy (needed if sustainability is to be maximal, though the subsidy will be at a different level from that for environmental policy alone); and a consumption tax which ultimately falls towards a 100% subsidy. The latter gives agents the incentive needed to invest when the return on capital is less than the utility discount rate. Neither a resource flow tax nor the resource stock subsidy on its own has any power to achieve sustainability. As a preliminary, we clarify some confusion in the literature about the relationship between PV-optimality and Hartwick’s Rule, using an exact solution for illustration.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 25
Date: 2001-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/125833/files/Pezzey2.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aare01:125833

DOI: 10.22004/ag.econ.125833

Access Statistics for this paper

More papers in 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia from Australian Agricultural and Resource Economics Society Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().

 
Page updated 2025-03-19
Handle: RePEc:ags:aare01:125833