Substitution Among Exhaustible Resources and Intergenerational Equity

  • Hartwick J
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Abstract

In Hartwick [3], it was shown that implicit in Solow's [10] model of intergenerational equity and exhaustible resources was the savings-investment rule: society should invest in reproducible capital precisely the current returns from the use of flows of exhaustible resources in order to maintain per capita consumption constant. Population was assumed to remain constant. In Solow [10] and Hartwick [3] it was assumed that there was only one exhaustible resource. Beckmann [1] & [2] has investigated optimal growth in models with many exhaustible resources. In tiffs paper we consider the case of many exhaustible resources and derive results on substitution among resources and on the nature of paths of development. One of Beckmann's results on substitution is analysed. Our approach is first to analyse efficient paths under the assumption of general savings functions and then to analyse efficient paths under the assumption of the special savings function referred to above. Our results indicate the Solow's existence theorem remains valid for the case of many exhaustible resources and some light is shed on the existence of paths for production functions not of the Cobb-Douglas form.

Author-supplied keywords

  • ECONOMIC stabilization
  • ECONOMICS
  • EQUILIBRIUM (Economics)
  • EQUITY
  • INVESTMENTS
  • MARKET equilibrium
  • NATURAL resources
  • NONRENEWABLE natural resources

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Authors

  • John M. Hartwick

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