Maximin-optimal sustainable growth with nonrenewable resource and externalities

Andrei V. Bazhanov

I offer an approach linking a welfare criterion to the “sustainable development opportunities” of the economy. This implies a dependence of a criterion on the information about the current state. I consider the problem for the Dasgupta-Heal-Solow-Stiglitz model with externalities. The economy-linked criterion is constructed on an example of the maximin principle applied to a hybrid level-growth measure. This measure includes as special cases the conventional measures of consumption level and percent change as a measure of growth. The hybrid measure or geometrically weighted percent can be used for measuring sustainable growth as an alternative to percent. The closed form solutions are obtained for the optimal paths including the paths, dynamically consistent with the updates in reserve estimates.

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Year of publication:	August 08, 2008
Authors:	Bazhanov, Andrei V.
Publisher:	Brussels, Belgium : EERI, Economics and Econometrics Research Institute
Subject:	Essential nonrenewable resource \| modified Hotelling Rule \| economy-linked criterion \| geometrically weighted percent \| normative resource peak \| Erschöpfbare Ressourcen \| Exhaustible resources \| Theorie \| Theory \| Nachhaltige Entwicklung \| Sustainable development \| Hotelling-Regel \| Hotelling rule \| Externer Effekt \| Externalities \| Ressourcenökonomik \| Resource economics