December 29, 2005
Ecological economics: sustaining optimal growth
Those interested in sustainable development may want to consider a paper recently published by Simone Valente of the Institute of Economic Research ETH Zurich, entitled "Sustainable Development: Renewable Resources and Technological Progress." Valente Paper As should be obvious, growth in per capita consumption cannot be sustained for exhaustible natural resources (Pezzey and Withagen 1998). Valente extends the model to include technical progress, resource renewability, extraction costs and population growth, with the result that optimal growth paths can only be maintained if the social discount rate does not exceed the sum of the rates of resource regeneration and augmentation. The development of resource-saving techniques is crucial for sustaining consumption per capita in the long run, whereas capital depreciation and extraction costs do not affect sustainability.
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