The document discusses optimal use of natural resources over time from an economic perspective. It develops a simple model where natural resources are an input in the production process along with capital. Under certain conditions, sustainable development is possible where consumption remains constant over time. The key conditions are:
- A high degree of substitutability between capital and natural resources.
- A sufficiently high rate of technical progress.
- The presence of a permanent "backstop" technology that does not require natural resources.
Market failures can occur in several ways, including underproduction or overproduction of goods, and when production or consumption affects third parties through externalities. This leads to inefficient allocation of resources.
Market failures are caused by imperfect knowledge, differentiated goods, immobile resources, market power, inability of the market to provide certain goods/services, and existence of external costs and benefits. Government intervention may be needed to address market failures through policies like regulation, taxes/subsidies, and altering property rights.
Rural employment is essential for India as the country faces economic crises. Encouraging agriculture and rural industries can benefit the economy. There is a need to address both challenges and opportunities for rural employment. Strategies are needed to generate employment as unemployment and poverty continue to increase despite government programs. Providing at least 100 days of work through programs like MGNREGA can help address rural unemployment. Overall, more focus is needed on rural development, industrialization, infrastructure and policies to raise employment levels in India.
Presentation by Stefan Frank, International Institute for Applied Systems Analysis (IIASA)
International conference on agricultural emissions and food security: Connecting research to policy and practice
10-13 September 2018
Berlin, Germany
Market failures can occur in several ways, including underproduction or overproduction of goods, and when production or consumption affects third parties through externalities not reflected in market prices. This leads to inefficient allocation of resources.
Market failures are caused by imperfect knowledge, differentiated goods, immobile resources, market power, inability of markets to provide certain goods/services, and existence of external costs and benefits. Government aims to correct market failures through regulation, taxes/subsidies, property rights, and allocating resources to collective goods.
(8th lecture) introduction to rural sociologyMarina Hanna
The document discusses land tenure systems and changes to agricultural land holdings in Egypt. It describes the main types of land tenure as private, public, trust/waqf, and encroachment. It outlines the shift from unequal distribution of large and small holdings prior to 1952 to reforms limiting individual ownership. Fragmentation and dispersal of holdings has increased the number of small owners. The impacts of climate change on Egyptian agriculture are also summarized, including vulnerability of coastal zones, water resources, and agriculture to rising temperatures and drought.
This document provides an overview of key concepts in the basic Keynesian macroeconomic model. It defines planned aggregate expenditure and its components. It then explains how the economy reaches short-run equilibrium where planned spending equals output. It demonstrates how a change in an autonomous spending component, like consumption, can cause the equilibrium to change and create an output gap. The income-expenditure multiplier is introduced to show how a $1 change in spending can impact output. Finally, it discusses how fiscal policy tools like government spending or tax changes can be used to address output gaps according to the Keynesian model.
Market failures can occur in several ways, including underproduction or overproduction of goods, and when production or consumption affects third parties through externalities. This leads to inefficient allocation of resources.
Market failures are caused by imperfect knowledge, differentiated goods, immobile resources, market power, inability of the market to provide certain goods/services, and existence of external costs and benefits. Government intervention may be needed to address market failures through policies like regulation, taxes/subsidies, and altering property rights.
Rural employment is essential for India as the country faces economic crises. Encouraging agriculture and rural industries can benefit the economy. There is a need to address both challenges and opportunities for rural employment. Strategies are needed to generate employment as unemployment and poverty continue to increase despite government programs. Providing at least 100 days of work through programs like MGNREGA can help address rural unemployment. Overall, more focus is needed on rural development, industrialization, infrastructure and policies to raise employment levels in India.
Presentation by Stefan Frank, International Institute for Applied Systems Analysis (IIASA)
International conference on agricultural emissions and food security: Connecting research to policy and practice
10-13 September 2018
Berlin, Germany
Market failures can occur in several ways, including underproduction or overproduction of goods, and when production or consumption affects third parties through externalities not reflected in market prices. This leads to inefficient allocation of resources.
Market failures are caused by imperfect knowledge, differentiated goods, immobile resources, market power, inability of markets to provide certain goods/services, and existence of external costs and benefits. Government aims to correct market failures through regulation, taxes/subsidies, property rights, and allocating resources to collective goods.
(8th lecture) introduction to rural sociologyMarina Hanna
The document discusses land tenure systems and changes to agricultural land holdings in Egypt. It describes the main types of land tenure as private, public, trust/waqf, and encroachment. It outlines the shift from unequal distribution of large and small holdings prior to 1952 to reforms limiting individual ownership. Fragmentation and dispersal of holdings has increased the number of small owners. The impacts of climate change on Egyptian agriculture are also summarized, including vulnerability of coastal zones, water resources, and agriculture to rising temperatures and drought.
This document provides an overview of key concepts in the basic Keynesian macroeconomic model. It defines planned aggregate expenditure and its components. It then explains how the economy reaches short-run equilibrium where planned spending equals output. It demonstrates how a change in an autonomous spending component, like consumption, can cause the equilibrium to change and create an output gap. The income-expenditure multiplier is introduced to show how a $1 change in spending can impact output. Finally, it discusses how fiscal policy tools like government spending or tax changes can be used to address output gaps according to the Keynesian model.
Rural to urban migration is a major driver of urbanization in Pakistan. Push factors like low agricultural productivity and pull factors like access to jobs and services encourage migration from rural to urban areas. This migration has wide-ranging social, economic, political, and environmental effects at individual, family, community, and national levels. Socially, it can cause isolation and stress for migrants while increasing ethnic tensions in cities. Economically, it grows GDP but also increases poverty as migrants struggle in cities. Politically, it shifts power dynamics and resources. Environmentally, it places stress on urban infrastructure and increases pollution.
This document discusses agricultural transformation and rural development. It begins by quoting several experts emphasizing the importance of agriculture for economic development. It then provides statistics on rural populations in developing regions. Key challenges discussed include stagnating productivity in Sub-Saharan Africa, unequal land distribution in Latin America, and land fragmentation in Asia. The document categorizes world agriculture systems and discusses traditional peasant agriculture patterns in different regions. It emphasizes the need for government policies to address market failures and ensure the poor benefit from agricultural growth.
Market failures occur when market forces fail to efficiently allocate resources, resulting in outcomes like shortages, surpluses, high prices, or poor quality goods. There are several types of market failures, including the failure to account for all costs and benefits to society, information failures between producers and consumers, and the under- or over-production of merit and demerit goods due to externalities. Other market failures stem from the characteristics of public goods, abuse of market power, immobility of resources, short-term thinking that ignores long-term investments, and unfair income distributions determined solely by market forces. Government interventions sometimes also fail to correct these market failures.
The green revolution aimed to increase crop yields through new high-yielding varieties of rice and wheat. This led to successes like tripling of yields in India, allowing the country to become self-sufficient in wheat and rice. However, there were also failures, as only wealthy farmers could afford the costs of the new seeds and technologies, which increased rural unemployment and migration to cities. The green revolution benefited some but was not financially viable for most small farmers. Appropriate technology tailored to existing skills could help increase living standards for more people.
Sustainable Development from an Economic PerspectiveUNDP Eurasia
This document summarizes a presentation by Dr. Joachim H. Spangenberg on sustainability from an economic perspective. It discusses sustaining capital stocks, getting prices right with environmental economics, limitations of a green economy approach, the full Brundtland definition of sustainable development, issues with production and consumption, and the real capacity deficit in sustainability. The presentation argues standard economics fails at sustainability and there is an urgent need for capacity building in sustainability economics.
1. There is a gender gap in climate-smart agriculture as it relates to access to resources, information, and decision making. Women are often neglected by climate services and have less capacity to implement climate adaptation practices in agriculture.
2. More evidence is needed on gender differences in roles and impacts, and on participatory approaches, women's organizations, and indigenous knowledge related to climate-smart agriculture.
3. Institutions and services need to better meet women's needs, as they tend to interact more with informal networks while men have greater access to formal institutions. The role of information and how to serve women better requires more understanding.
This document discusses various indicators used to measure economic development. It describes two main categories of indicators - income-based and quality-based. Among the most important indicators are per capita income, the Physical Quality of Life Index (PQLI), and the Human Development Index (HDI). The PQLI uses measures of life expectancy, infant mortality, and literacy to evaluate quality of life. The HDI takes a broader approach by considering factors like health, education, and standard of living. While useful, all indicators have limitations. The HDI is now widely used internationally to provide a more comprehensive view of development.
This document discusses reducing inequality. It defines social inequality and lists several types, including political, income/wealth, opportunity, treatment/responsibility, membership, gender, racial/ethnic, age, and health inequalities. Facts show inequality increased 11% in developing countries from 1990-2010 and most people live in unequal societies. Inequality can harm growth beyond a threshold. Reducing inequality involves programs supporting youth outcomes across academic, social, behavioral and economic domains through fighting poverty and elevating lower incomes rather than restricting top incomes. Common policies across countries include early childhood development, universal healthcare, education, conditional cash transfers, rural infrastructure and progressive taxation. Simulations show reducing inequality faster than current global growth rates may be needed to end
The document discusses climate change and the energy sector. It provides information on:
1) The greenhouse effect and how human activities are increasing greenhouse gas levels and global warming.
2) Key greenhouse gases like carbon dioxide and their sources. Human activities like fossil fuel use are the main driver of rising CO2 levels.
3) Climate change is already affecting factors like temperature, sea levels, and glaciers. Impacts are projected for areas like agriculture, water resources, and human health.
4) International agreements like the UNFCCC and Kyoto Protocol aim to reduce emissions but countries have different commitments. The EU ETS is a carbon market program to lower emissions cost-effectively.
This document defines key concepts related to markets and market failures. It discusses that a market involves buyers and sellers coming together voluntarily to exchange goods and services. However, markets do not always allocate resources efficiently due to market failures, where supply and demand are not properly balanced. The document outlines several common types of market failures including natural monopolies, externalities, lack of public goods, and asymmetric information. It provides examples of each and discusses how market failures can lead to sub-optimal outcomes and barriers to growth and development.
The document discusses externalities and the role of government in addressing market failures caused by externalities. It defines externalities as costs or benefits imposed on third parties by production or consumption activities. When externalities are present, markets allocate resources inefficiently. The government can intervene to correct market failures through Pigouvian taxes to internalize negative externalities or subsidies to encourage positive externalities. By internalizing external costs and benefits, the government can make prices reflect true social costs and benefits, leading to more economically efficient outcomes.
This document discusses key concepts and techniques for analyzing migration patterns. It begins by defining migration as a change in usual residence between geographic units, and defines related terms like migrants, place of origin/destination, migration streams, and types of migration. It then discusses major data sources for migration like censuses and surveys. The document outlines several methods for measuring migration patterns, like using place of birth, duration of residence, and survival ratios. It concludes by discussing determinants and consequences of internal migration and references for further information.
This document discusses the impacts of climate change in Nepal and potential mitigation initiatives. Some key points:
- Nepal is experiencing rising temperatures, with averages rising 0.6°C annually and higher in the Himalayas.
- This is causing glaciers and snow to melt more rapidly, reducing water availability and damaging agriculture and food security. Disease incidence is also rising.
- To mitigate these impacts, Nepal is promoting renewable energy, reducing emissions from deforestation, and mainstreaming climate change into policies. However, more efforts are needed to increase access to low-carbon energy and mobilize financing for climate actions.
Government expenditure and taxes are important instruments of fiscal policy that can impact equilibrium GDP. A rise in government expenditure will cause the aggregate expenditure curve to shift right in parallel, increasing equilibrium GDP according to the government spending multiplier. A tax increase will cause the aggregate expenditure curve to shift left in a non-parallel way, reducing equilibrium GDP according to the tax revenue multiplier. Equilibrium GDP is determined by the intersection of aggregate expenditure and aggregate output, where planned expenditure equals total output in the economy.
Urbanization is the increasing percentage of people living in urban areas. It results from rural migration and population growth in cities. Functionalism views society as a complex system where all parts influence each other. Two theories are human ecology, which examines human relationships with environments, and urban ecology, which studies organisms in urban settings. Functionalism includes three theories of urban structure: concentric zone theory of socioeconomic zones radiating from the city center; demographic transition theory of population changes from high birth/death rates to low rates; and multiple nuclei theory of specialized activity centers in a city.
This document discusses concepts related to economic development, including factors that determine development levels, characteristics of less developed and developed countries, and methods for measuring development. It presents several models of development, including Rostow's stages of growth model and dependency theory. Key points include: resources, population, location, and colonial status influence development; less developed countries have lower incomes, subsistence farming, and poorer social conditions compared to developed countries with higher incomes, manufacturing/services, and better social conditions; development is commonly measured using GDP per capita, rates like literacy, and occupational structure; and the core-periphery model and dependency theory argue regional disparities are structural features of the global economy.
Due to the global economy, the spatiality is more and more important issue. In the past, usually spatial organization based on nation level, for now this is fundamentally transformed to regions.
Population geography examines how population characteristics vary spatially and change over time. It studies demographic phenomena like birth rates, death rates, and migration patterns in geographical contexts. Population geography analyzes population distributions, densities, and structures to understand how they are influenced by and influence specific places. It uses maps to visualize spatial variations in population characteristics.
Trickle-down economics proposes that tax breaks and benefits for wealthy individuals and corporations will trickle down to poorer people in the form of job opportunities and economic growth. The document discusses arguments for and against whether agricultural growth in India through the 1970s benefited the poor through trickle-down effects. Supporters argue growth increased rural incomes, while critics like Bardhan argue new technologies disadvantaged laborers and small farmers, limiting benefits for the poor. While some link between growth and poverty reduction may have existed, critics argue agricultural expansion over the last two decades through technology has not reduced poverty as much as supporters claim.
Agricultural Transformation and Rural Developmentguestf494e5
The document discusses agricultural development and rural transformation. It covers several topics:
1) More than half the world's population lives in rural areas facing poverty, inequality, unemployment and rapid population growth. Integrated rural development strategies are needed to address these issues.
2) Agriculture employs most of the labor force in developing countries but accounts for a small portion of GDP. Agricultural productivity has increased in some countries but declined in others like Africa.
3) Agrarian systems and agricultural development stages vary around the world. Recommended policies include improving small farmer productivity, rural non-farm employment, and equitable access to technology and credit.
Ramsey–Cass–Koopmans model and its application in EthiopiaMolla Derbe
Many economists have argued on macroeconomics words for several years in their school of
thoughts. Ramsey, the neoclassical economist, has not believed in the Solow model with some
terms. What makes his model differs from the Solow model is that it explicitly models the choice
of consumption at a point in time and so has made the savings rate endogenous. The Twentieth
first research in Ethiopia (Seid Nuru, 2012, p.6-7) found that the outcome of the optimization of
the dynamic model is that growth in the long-run depends on the rate of technological change
and rate of change of rainfall variability in terms of both amplitude and frequency.
Ramsey–Cass–Koopmans model and its application in EthiopiaMolla Derbe
Many economists have argued on macroeconomics words for several years in their school of
thoughts. Ramsey, the neoclassical economist, has not believed in the Solow model with some
terms. What makes his model differs from the Solow model is that it explicitly models the choice
of consumption at a point in time and so has made the savings rate endogenous. The Twentieth
first research in Ethiopia (Seid Nuru, 2012, p.6-7) found that the outcome of the optimization of
the dynamic model is that growth in the long-run depends on the rate of technological change
and rate of change of rainfall variability in terms of both amplitude and frequency.
Rural to urban migration is a major driver of urbanization in Pakistan. Push factors like low agricultural productivity and pull factors like access to jobs and services encourage migration from rural to urban areas. This migration has wide-ranging social, economic, political, and environmental effects at individual, family, community, and national levels. Socially, it can cause isolation and stress for migrants while increasing ethnic tensions in cities. Economically, it grows GDP but also increases poverty as migrants struggle in cities. Politically, it shifts power dynamics and resources. Environmentally, it places stress on urban infrastructure and increases pollution.
This document discusses agricultural transformation and rural development. It begins by quoting several experts emphasizing the importance of agriculture for economic development. It then provides statistics on rural populations in developing regions. Key challenges discussed include stagnating productivity in Sub-Saharan Africa, unequal land distribution in Latin America, and land fragmentation in Asia. The document categorizes world agriculture systems and discusses traditional peasant agriculture patterns in different regions. It emphasizes the need for government policies to address market failures and ensure the poor benefit from agricultural growth.
Market failures occur when market forces fail to efficiently allocate resources, resulting in outcomes like shortages, surpluses, high prices, or poor quality goods. There are several types of market failures, including the failure to account for all costs and benefits to society, information failures between producers and consumers, and the under- or over-production of merit and demerit goods due to externalities. Other market failures stem from the characteristics of public goods, abuse of market power, immobility of resources, short-term thinking that ignores long-term investments, and unfair income distributions determined solely by market forces. Government interventions sometimes also fail to correct these market failures.
The green revolution aimed to increase crop yields through new high-yielding varieties of rice and wheat. This led to successes like tripling of yields in India, allowing the country to become self-sufficient in wheat and rice. However, there were also failures, as only wealthy farmers could afford the costs of the new seeds and technologies, which increased rural unemployment and migration to cities. The green revolution benefited some but was not financially viable for most small farmers. Appropriate technology tailored to existing skills could help increase living standards for more people.
Sustainable Development from an Economic PerspectiveUNDP Eurasia
This document summarizes a presentation by Dr. Joachim H. Spangenberg on sustainability from an economic perspective. It discusses sustaining capital stocks, getting prices right with environmental economics, limitations of a green economy approach, the full Brundtland definition of sustainable development, issues with production and consumption, and the real capacity deficit in sustainability. The presentation argues standard economics fails at sustainability and there is an urgent need for capacity building in sustainability economics.
1. There is a gender gap in climate-smart agriculture as it relates to access to resources, information, and decision making. Women are often neglected by climate services and have less capacity to implement climate adaptation practices in agriculture.
2. More evidence is needed on gender differences in roles and impacts, and on participatory approaches, women's organizations, and indigenous knowledge related to climate-smart agriculture.
3. Institutions and services need to better meet women's needs, as they tend to interact more with informal networks while men have greater access to formal institutions. The role of information and how to serve women better requires more understanding.
This document discusses various indicators used to measure economic development. It describes two main categories of indicators - income-based and quality-based. Among the most important indicators are per capita income, the Physical Quality of Life Index (PQLI), and the Human Development Index (HDI). The PQLI uses measures of life expectancy, infant mortality, and literacy to evaluate quality of life. The HDI takes a broader approach by considering factors like health, education, and standard of living. While useful, all indicators have limitations. The HDI is now widely used internationally to provide a more comprehensive view of development.
This document discusses reducing inequality. It defines social inequality and lists several types, including political, income/wealth, opportunity, treatment/responsibility, membership, gender, racial/ethnic, age, and health inequalities. Facts show inequality increased 11% in developing countries from 1990-2010 and most people live in unequal societies. Inequality can harm growth beyond a threshold. Reducing inequality involves programs supporting youth outcomes across academic, social, behavioral and economic domains through fighting poverty and elevating lower incomes rather than restricting top incomes. Common policies across countries include early childhood development, universal healthcare, education, conditional cash transfers, rural infrastructure and progressive taxation. Simulations show reducing inequality faster than current global growth rates may be needed to end
The document discusses climate change and the energy sector. It provides information on:
1) The greenhouse effect and how human activities are increasing greenhouse gas levels and global warming.
2) Key greenhouse gases like carbon dioxide and their sources. Human activities like fossil fuel use are the main driver of rising CO2 levels.
3) Climate change is already affecting factors like temperature, sea levels, and glaciers. Impacts are projected for areas like agriculture, water resources, and human health.
4) International agreements like the UNFCCC and Kyoto Protocol aim to reduce emissions but countries have different commitments. The EU ETS is a carbon market program to lower emissions cost-effectively.
This document defines key concepts related to markets and market failures. It discusses that a market involves buyers and sellers coming together voluntarily to exchange goods and services. However, markets do not always allocate resources efficiently due to market failures, where supply and demand are not properly balanced. The document outlines several common types of market failures including natural monopolies, externalities, lack of public goods, and asymmetric information. It provides examples of each and discusses how market failures can lead to sub-optimal outcomes and barriers to growth and development.
The document discusses externalities and the role of government in addressing market failures caused by externalities. It defines externalities as costs or benefits imposed on third parties by production or consumption activities. When externalities are present, markets allocate resources inefficiently. The government can intervene to correct market failures through Pigouvian taxes to internalize negative externalities or subsidies to encourage positive externalities. By internalizing external costs and benefits, the government can make prices reflect true social costs and benefits, leading to more economically efficient outcomes.
This document discusses key concepts and techniques for analyzing migration patterns. It begins by defining migration as a change in usual residence between geographic units, and defines related terms like migrants, place of origin/destination, migration streams, and types of migration. It then discusses major data sources for migration like censuses and surveys. The document outlines several methods for measuring migration patterns, like using place of birth, duration of residence, and survival ratios. It concludes by discussing determinants and consequences of internal migration and references for further information.
This document discusses the impacts of climate change in Nepal and potential mitigation initiatives. Some key points:
- Nepal is experiencing rising temperatures, with averages rising 0.6°C annually and higher in the Himalayas.
- This is causing glaciers and snow to melt more rapidly, reducing water availability and damaging agriculture and food security. Disease incidence is also rising.
- To mitigate these impacts, Nepal is promoting renewable energy, reducing emissions from deforestation, and mainstreaming climate change into policies. However, more efforts are needed to increase access to low-carbon energy and mobilize financing for climate actions.
Government expenditure and taxes are important instruments of fiscal policy that can impact equilibrium GDP. A rise in government expenditure will cause the aggregate expenditure curve to shift right in parallel, increasing equilibrium GDP according to the government spending multiplier. A tax increase will cause the aggregate expenditure curve to shift left in a non-parallel way, reducing equilibrium GDP according to the tax revenue multiplier. Equilibrium GDP is determined by the intersection of aggregate expenditure and aggregate output, where planned expenditure equals total output in the economy.
Urbanization is the increasing percentage of people living in urban areas. It results from rural migration and population growth in cities. Functionalism views society as a complex system where all parts influence each other. Two theories are human ecology, which examines human relationships with environments, and urban ecology, which studies organisms in urban settings. Functionalism includes three theories of urban structure: concentric zone theory of socioeconomic zones radiating from the city center; demographic transition theory of population changes from high birth/death rates to low rates; and multiple nuclei theory of specialized activity centers in a city.
This document discusses concepts related to economic development, including factors that determine development levels, characteristics of less developed and developed countries, and methods for measuring development. It presents several models of development, including Rostow's stages of growth model and dependency theory. Key points include: resources, population, location, and colonial status influence development; less developed countries have lower incomes, subsistence farming, and poorer social conditions compared to developed countries with higher incomes, manufacturing/services, and better social conditions; development is commonly measured using GDP per capita, rates like literacy, and occupational structure; and the core-periphery model and dependency theory argue regional disparities are structural features of the global economy.
Due to the global economy, the spatiality is more and more important issue. In the past, usually spatial organization based on nation level, for now this is fundamentally transformed to regions.
Population geography examines how population characteristics vary spatially and change over time. It studies demographic phenomena like birth rates, death rates, and migration patterns in geographical contexts. Population geography analyzes population distributions, densities, and structures to understand how they are influenced by and influence specific places. It uses maps to visualize spatial variations in population characteristics.
Trickle-down economics proposes that tax breaks and benefits for wealthy individuals and corporations will trickle down to poorer people in the form of job opportunities and economic growth. The document discusses arguments for and against whether agricultural growth in India through the 1970s benefited the poor through trickle-down effects. Supporters argue growth increased rural incomes, while critics like Bardhan argue new technologies disadvantaged laborers and small farmers, limiting benefits for the poor. While some link between growth and poverty reduction may have existed, critics argue agricultural expansion over the last two decades through technology has not reduced poverty as much as supporters claim.
Agricultural Transformation and Rural Developmentguestf494e5
The document discusses agricultural development and rural transformation. It covers several topics:
1) More than half the world's population lives in rural areas facing poverty, inequality, unemployment and rapid population growth. Integrated rural development strategies are needed to address these issues.
2) Agriculture employs most of the labor force in developing countries but accounts for a small portion of GDP. Agricultural productivity has increased in some countries but declined in others like Africa.
3) Agrarian systems and agricultural development stages vary around the world. Recommended policies include improving small farmer productivity, rural non-farm employment, and equitable access to technology and credit.
Ramsey–Cass–Koopmans model and its application in EthiopiaMolla Derbe
Many economists have argued on macroeconomics words for several years in their school of
thoughts. Ramsey, the neoclassical economist, has not believed in the Solow model with some
terms. What makes his model differs from the Solow model is that it explicitly models the choice
of consumption at a point in time and so has made the savings rate endogenous. The Twentieth
first research in Ethiopia (Seid Nuru, 2012, p.6-7) found that the outcome of the optimization of
the dynamic model is that growth in the long-run depends on the rate of technological change
and rate of change of rainfall variability in terms of both amplitude and frequency.
Ramsey–Cass–Koopmans model and its application in EthiopiaMolla Derbe
Many economists have argued on macroeconomics words for several years in their school of
thoughts. Ramsey, the neoclassical economist, has not believed in the Solow model with some
terms. What makes his model differs from the Solow model is that it explicitly models the choice
of consumption at a point in time and so has made the savings rate endogenous. The Twentieth
first research in Ethiopia (Seid Nuru, 2012, p.6-7) found that the outcome of the optimization of
the dynamic model is that growth in the long-run depends on the rate of technological change
and rate of change of rainfall variability in terms of both amplitude and frequency.
Production analysis by Neeraj Bhandari ( Surkhet.Nepal )Neeraj Bhandari
The document provides information on production functions and related concepts:
- A production function describes the technological relationship between inputs and outputs. It represents the maximum output attainable from various combinations of inputs.
- Inputs can be fixed or variable. The short run is when some inputs are fixed, while the long run allows variation in all inputs.
- Isoquants represent combinations of inputs that produce equal output. They have properties like being negatively sloped, non-intersecting, and convex to the origin.
- Laws of production include diminishing marginal returns and variable proportions. Returns to scale can be increasing, constant, or decreasing in the long run depending on output and input changes.
his file is created for educational purpose not for sale.
Creator of this presentation is highly appreciated the Authors:Christopher D. Carroll, Jody Overland and David N. Weil
Source: Journal of Economic Growth, Vol. 2, No. 4 (Dec., 1997), pp. 339-367 Published by: Springer
The document summarizes the Ramsey-Cass-Koopmans model of economic growth. It describes the key assumptions of the model including representative consumers who maximize utility subject to a budget constraint. The model endogenizes savings by allowing for intertemporal consumer optimization. It presents the optimal growth conditions including the Euler equation and transitional dynamics towards a steady state equilibrium with constant capital-labor ratio and consumption.
Workshop Trade-off Analysis - CGIAR_21 Feb 2013_Group discussion_1.Theory of ...LotteKlapwijk
1. Theories of change need to be dynamic and set against plausible future scenarios to account for underlying trends and potential shocks. They should acknowledge non-linear change and tipping points.
2. Outcomes should be articulated honestly and realistically in terms of contributions rather than strict attribution, and consider trade-offs between different goals and timescales. Process-level indicators are also important.
3. Theories of change will need revising as realities emerge, and should embrace system-level definitions to influence key actors and institutions driving change. Building resilience to mitigate anticipated and unanticipated shocks at different scales should also be included.
The paper presents an explicitly dynamic version of the Sraffian supermultiplier growth model in order to analyze its equilibrium path, local stability conditions and dynamic behavior in the neighborhood of equilibrium. This analysis is used to address the criticisms to model found in the literature and also to compare the model with the Cambridge and neo-Kaleckian growth models. The comparative inquiry confirms that the model can be considered a theoretical alternative to the Cambridge and neo-Kaleckian growth models in the analysis of the relationship between economic growth, income distribution and effective demand. The specific closure provided by the supermultiplier growth model allows it to generate a demand-led pattern of economic growth characterized by a tendency towards the normal utilization of productive capacity, while considering income distribution exogenously determined by political, historical and economic forces.
Environmental Resources, Scarcity and the Heterodox Production Modelpkconference
This document discusses different perspectives on resource scarcity from ecological economics and institutional economics. It argues that both perspectives are valid when focused on their proper domains, as ecological economics looks at natural limits while institutional economics views resources as produced means of production. The document also discusses how to model resource constraints and waste within a heterodox production model framework by integrating physical and economic analyses through a social fabric matrix.
The document discusses power system planning and economics. It begins by defining key terms used in power system planning and economic analysis, such as revenue, costs, profit, depreciation, interest rates, and present value. It then explains the cash flow concept and time value of money. The main method of economic analysis discussed is the present worth method. This method is explained for both equal-life and different-life alternatives. Calculating the present worth and selecting the alternative with the highest present worth is the approach. Examples are provided to illustrate present worth analysis for both equal-life and different-life power system projects or alternatives. Factors that drove a shift to smaller power plants in the 1960s from the previous economies of scale approach
The document discusses the theory of production, including defining key concepts like the production function and factors of production. It explains that a production function shows the relationship between inputs like labor and capital to the output of a firm. The document also covers the laws of variable proportions and diminishing returns, noting that initially adding more of one input leads to increasing returns but eventually marginal returns decrease. Finally, it provides an example of how marginal product changes as labor is added to fixed land and capital, going through stages of increasing, diminishing, and eventually negative returns.
Isoquants, MRTS, Concept of Total Product, Average & Marginal Product, Short Run and Long Run analysis of production, The Law of Variable proportion, Returns to scale,
Production Cost – Concept of Cost, Classification of Short run cost – Long run cost,
Instructions and Advice · This assignment consists of six que.docxdirkrplav
Instructions and Advice:
· This assignment consists of six questions. They each have lots of parts but most of them are very short!
· Data for Questions 3 and 6 are in the companion Excel spreadsheet <Asst3_2013_Data.xlsx>.
· Present the parts of your answers in the same order as the questions are asked.
· Do not include any original data in your printed submission.
· Maintain all precision in your calculator or in Excel as you do your multi-step computations. Round off to fewer decimal places only when you write your work and the final answer down to hand in.
· When formatting numbers in Excel, display only as many decimal places as provide decision-making value to the reader.
Question 1 – Interpreting or Misinterpreting Correlation
a) Various factors are associated with the gross domestic product (GDP) of nations. State whether each of the following statements is reasonable or not. If not, explain the blunder.
(i) A correlation of –0.722 shows that there is almost no association between GDP and Infant Mortality Rate.
(ii) There is a correlation of 0.44 between GDP and Continent.
(iii) There is a very strong correlation of 1.22 between Life Expectancy and GDP.
(iv) The correlation between Literacy Rate and GDP was 0.83. This shows that countries wanting to increase their standard of living should invest heavily in education.
b) An article in a business magazine reported that Internet E-commerce has doubled nearly every three years. It then stated that there was a high correlation between sales made on the Internet and year. Do you think this is an appropriate summary? Explain in one sentence.
c) Simpson’s Paradox can occur in regression, when a relationship between variables within groups of observations is reversed if all the data are combined. Here is an example.
Group
X
Y
Group
X
Y
1
1
10.1
2
6
18.3
1
2
8.9
2
7
17.1
1
3
8.9
2
8
16.2
1
4
6.9
2
9
15.1
1
5
6.1
2
10
14.3
(i) Make a scatterplot of the data for Group 1 and add the least squares line. Describe the relationship between Y and X for Group 1. Find the correlation (using Excel).
(ii) Do the same for Group 2.
(iii) Make a scatterplot using all 10 observations and add the least squares line. Find the correlation (using Excel).
(iv) Summarize your findings in one or two sentences.
d) Since 1980, average mortgage interest rates in the U.S. have fluctuated from a low of under 6% to a high of over 14%. Is there a relationship between the amount of money people borrow and the interest rate that’s offered? Here is a scatterplot of Total Mortgages in the U.S. (in millions of 2005 dollars) vs. Interest Rates at various times over the past 26 years. The correlation is -0.84.
(i) Describe the relationship between Total Mortgages and Interest Rate.
(ii) If we standardized both variables, what would the correlation coefficient between the standardized variables be?
(iii) If we were to measure Total Mortgages in thousands of dollars instead of millions of dollars, how would the.
Déjà Vu All Over Again - The Cambridge Capital Controversies and Skill-Biased...pkconference
The document discusses criticisms of the dominant skill-biased technical change hypothesis for rising income inequality. It summarizes the Cambridge capital controversies which undermined one-commodity aggregate production function models. These debates demonstrated that such models cannot be extended to an economy with multiple inputs and outputs. As a result, the substitution mechanism between skilled and unskilled labor proposed by the skill-biased technical change hypothesis is theoretically problematic. The document calls for a reconceptualization of income distribution theory in light of these issues.
Consumption, Investment and Stabilization(1).pptxYAshuMuchhal
The document discusses key concepts in macroeconomics related to consumption, investment, and stabilization policy. It covers Keynes' consumption function, including the average propensity to consume (APC) and marginal propensity to consume (MPC). It also discusses empirical estimates of the consumption function and attempts to reconcile short-run and long-run consumption functions. The document then covers investment and the desired capital stock, as well as goods market equilibrium where supply equals demand as Y=C+I+G.
Basic concept of renewable resources, Growth curves, Rate of exploitation, Costs and Revenues, A model with time dimension, Fundamental rule of renewable resource exploitation, Problem of extinction, Open and Restricted access for resource harvest, Profit maximization and Extinction
Innovation and Change in the Historically Conservative Water Utility Industry...marcus evans Network
Paul Gagliardo, American Water - Speaker at the marcus evans Water & Wastewater Management Summit 2012, held in Summerlin, NV, May 3-4, 2012 delivered his presentation entitled Innovation and Change in the Historically Conservative Water Utility Industry
Life way, Livelihood, and LossA thread throughout this course ha.docxSHIVA101531
Life way, Livelihood, and Loss
A thread throughout this course has been to link issues among indigenous communities and your community — which may feel similar to an indigenous community by virtue of its longevity or identification with a life way. One way to build on this correlation is to examine how resource ownership, use, and sustainability can affect an indigenous or traditional community. Understanding how an economic livelihood informs an occupational identity helps connect how sustainability and resource allocation informs an indigenous identity. In this application, you will encounter a scenario in which the resources that you've come to depend upon are no longer available, and then you will evaluate the impact that this has.
To prepare for this Application:
· Review this week Resources, paying particular attention to the ways in which resource allocation, development, and changes to life way affect indigenous peoples.
· Identify a central resource upon which your own community, or a community you are familiar with, is dependent.
· For the purposes of this assignment, you can equate job identity with indigenous identity as a way to step into an indigenous viewpoint.
· Hypothesize a scenario (or describe a real scenario) in which this community loses the ability to utilize a resource for economic purposes. For example, did your hometown once support a productive coal industry that has now disappeared? Have shipping and dock work in your port town been replaced or relocated?
The assignment:
· Compose a 1- to 2-page paper in which you do the following:
Summarize how the loss of a resource that contributes to the economic livelihood of the community that you identified affects the well being of that community.
For example, how would this loss affect your status and a younger generation's status?
Could you move? How would others view your community?
With this identification of similar circumstances in mind, evaluate the scope and impact of environmental change and economic development on indigenous peoples.
Articles
Aikau, H., & Spencer, J. (2007). Introduction: Local reaction to global integration: The political economy of development in indigenous communities. Alternatives: Global, local, political, 32(1), 1–8 .
Valdivia, G. (2007). The Amazonian trial of the century: Indigenous identities, transnational networks, and petroleum in Ecuador. Alternatives: Global, local, political, 32(1), 41–72.
Partlow, J. (2008, October 14). Doubt, anger over Brazil dams: As work begins along Amazon tributary, many question human, environmental costs. The Washington Post, A11.
Web Sites
· International Forum on Globalization
http://www.ifg.org/programs/indig.htm
· Solar Cookers International SCI
http://www.solarcookers.org/
· Tebtebba
http://www.tebtebba.org/
· Survival International
http://www.survivalinternational.org/
· The Indigenous Peoples of the World Foundation
http://www.peoplesoftheworld.org/about.jsp
· United Nations CyberSchoolbus ...
This document outlines a conceptual framework and action agenda for sustainable development goals related to global energy needs between now and 2050. It notes that the world population will grow from 7 to 9 billion people over this time period and the global economy will increase substantially. Meeting rising energy demand in a sustainable way will require reducing fossil fuel consumption in developed countries to allow developing countries to access energy for growth. Overall energy use per capita should increase through non-fossil fuels like renewables. An action agenda is proposed focused on sustainable policy, business models that enable clean energy infrastructure, and ensuring affordable access to meet social needs.
Optimizing Post Remediation Groundwater Performance with Enhanced Microbiolog...Joshua Orris
Results of geophysics and pneumatic injection pilot tests during 2003 – 2007 yielded significant positive results for injection delivery design and contaminant mass treatment, resulting in permanent shut-down of an existing groundwater Pump & Treat system.
Accessible source areas were subsequently removed (2011) by soil excavation and treated with the placement of Emulsified Vegetable Oil EVO and zero-valent iron ZVI to accelerate treatment of impacted groundwater in overburden and weathered fractured bedrock. Post pilot test and post remediation groundwater monitoring has included analyses of CVOCs, organic fatty acids, dissolved gases and QuantArray® -Chlor to quantify key microorganisms (e.g., Dehalococcoides, Dehalobacter, etc.) and functional genes (e.g., vinyl chloride reductase, methane monooxygenase, etc.) to assess potential for reductive dechlorination and aerobic cometabolism of CVOCs.
In 2022, the first commercial application of MetaArray™ was performed at the site. MetaArray™ utilizes statistical analysis, such as principal component analysis and multivariate analysis to provide evidence that reductive dechlorination is active or even that it is slowing. This creates actionable data allowing users to save money by making important site management decisions earlier.
The results of the MetaArray™ analysis’ support vector machine (SVM) identified groundwater monitoring wells with a 80% confidence that were characterized as either Limited for Reductive Decholorination or had a High Reductive Reduction Dechlorination potential. The results of MetaArray™ will be used to further optimize the site’s post remediation monitoring program for monitored natural attenuation.
RoHS stands for Restriction of Hazardous Substances, which is also known as t...vijaykumar292010
RoHS stands for Restriction of Hazardous Substances, which is also known as the Directive 2002/95/EC. It includes the restrictions for the use of certain hazardous substances in electrical and electronic equipment. RoHS is a WEEE (Waste of Electrical and Electronic Equipment).
Kinetic studies on malachite green dye adsorption from aqueous solutions by A...Open Access Research Paper
Water polluted by dyestuffs compounds is a global threat to health and the environment; accordingly, we prepared a green novel sorbent chemical and Physical system from an algae, chitosan and chitosan nanoparticle and impregnated with algae with chitosan nanocomposite for the sorption of Malachite green dye from water. The algae with chitosan nanocomposite by a simple method and used as a recyclable and effective adsorbent for the removal of malachite green dye from aqueous solutions. Algae, chitosan, chitosan nanoparticle and algae with chitosan nanocomposite were characterized using different physicochemical methods. The functional groups and chemical compounds found in algae, chitosan, chitosan algae, chitosan nanoparticle, and chitosan nanoparticle with algae were identified using FTIR, SEM, and TGADTA/DTG techniques. The optimal adsorption conditions, different dosages, pH and Temperature the amount of algae with chitosan nanocomposite were determined. At optimized conditions and the batch equilibrium studies more than 99% of the dye was removed. The adsorption process data matched well kinetics showed that the reaction order for dye varied with pseudo-first order and pseudo-second order. Furthermore, the maximum adsorption capacity of the algae with chitosan nanocomposite toward malachite green dye reached as high as 15.5mg/g, respectively. Finally, multiple times reusing of algae with chitosan nanocomposite and removing dye from a real wastewater has made it a promising and attractive option for further practical applications.
Improving the viability of probiotics by encapsulation methods for developmen...Open Access Research Paper
The popularity of functional foods among scientists and common people has been increasing day by day. Awareness and modernization make the consumer think better regarding food and nutrition. Now a day’s individual knows very well about the relation between food consumption and disease prevalence. Humans have a diversity of microbes in the gut that together form the gut microflora. Probiotics are the health-promoting live microbial cells improve host health through gut and brain connection and fighting against harmful bacteria. Bifidobacterium and Lactobacillus are the two bacterial genera which are considered to be probiotic. These good bacteria are facing challenges of viability. There are so many factors such as sensitivity to heat, pH, acidity, osmotic effect, mechanical shear, chemical components, freezing and storage time as well which affects the viability of probiotics in the dairy food matrix as well as in the gut. Multiple efforts have been done in the past and ongoing in present for these beneficial microbial population stability until their destination in the gut. One of a useful technique known as microencapsulation makes the probiotic effective in the diversified conditions and maintain these microbe’s community to the optimum level for achieving targeted benefits. Dairy products are found to be an ideal vehicle for probiotic incorporation. It has been seen that the encapsulated microbial cells show higher viability than the free cells in different processing and storage conditions as well as against bile salts in the gut. They make the food functional when incorporated, without affecting the product sensory characteristics.
Evolving Lifecycles with High Resolution Site Characterization (HRSC) and 3-D...Joshua Orris
The incorporation of a 3DCSM and completion of HRSC provided a tool for enhanced, data-driven, decisions to support a change in remediation closure strategies. Currently, an approved pilot study has been obtained to shut-down the remediation systems (ISCO, P&T) and conduct a hydraulic study under non-pumping conditions. A separate micro-biological bench scale treatability study was competed that yielded positive results for an emerging innovative technology. As a result, a field pilot study has commenced with results expected in nine-twelve months. With the results of the hydraulic study, field pilot studies and an updated risk assessment leading site monitoring optimization cost lifecycle savings upwards of $15MM towards an alternatively evolved best available technology remediation closure strategy.
2. Objectives
• Develop a simple economic model, built around a production function in
which natural resources are inputs into the production process;
• Identify the conditions that must be satisfied by an economically efficient
pattern of natural resource use over time;
• Establish the characteristics of a socially optimal pattern of resource use over
time in the special case of a utilitarian social welfare function.
3. A simple optimal resource depletion model:
the economy and its production function
• The economy produces a single good, Q, which can be either consumed or invested.
• Consumption increases current well-being, while investment increases the capital stock,
permitting greater consumption in the future.
• Output is generated through a production function using as inputs a single ‘composite’
non-renewable resource input, R, and manufactured capital, K:
Q = Q(K, R) (1)
4. Is the natural resource essential?
• Essentialness of a resource could mean several things.
• Here, we interpret this term to mean whether a resource is directly essential for
production (where production and the resource are both conceptualised sources at a high
degree of aggregation, dealing with general classes such as total output and non-
renewable and renewable resources.
• A productive input is defined to be essential if output is zero whenever the quantity of
that input is zero, irrespective of the amounts of other inputs used. That is, R is essential
if Q = Q(K, R = 0) = 0 for any positive value of K….. (2)
• In the case of the CD production function, R and K are both essential, as setting any
input to zero in equation results in Q = 0…. (3)
5. Relevance
• If we wish to answer questions about the long-run properties of economic systems, the
essentialness of non-renewable resources will matter.
• Since, by definition, non-renewable resources exist in finite quantities it is not possible
to use constant and positive amounts of them over infinite horizons.
• However, if a resource is essential, then we know that production can only be
undertaken if some positive amount of the input is used.
• This seems to suggest that production and consumption cannot be sustained indefinitely
if a non-renewable resource is a necessary input to production.
• However, if the rate at which the resource is used were to decline asymptotically to zero,
and so never actually become zero in finite time, then production could be sustained
indefinitely even if the resource were essential.
• Whether output could rise, or at least stay constant over time, or whether it would have
to decline towards zero will depend upon the extent to which other resources can be
substituted for non-renewable resources and upon the behaviour of output as this
substitution takes place.
6. Elasticity of substitution
Expression:
or equivalently:
• where the partial derivative QR = ∂Q/∂R denotes the marginal product of the resource;
QK = ∂Q/∂K denotes the marginal product of capital, and where PR and PK denote the
unit prices of the non-renewable resource and capital, respectively.
7. Q
Q
= 0
Q
Q Q
Q
0 < <
=
Figure 1 Substitution possibilities and the shapes of production function
isoquants
K
R
0
8. Substitution possibilities and the shapes of
production function isoquants
• The differing substitution possibilities are reflected in the curvatures of the isoquants.
• In the case where no input substitution is possible (that is, σ = 0), inputs must be
combined in fixed proportions and the isoquants will be L-shaped. (Known as Leontief
functions. They are commonly used in input–output models of the economy.)
• At the other extreme, if substitution is perfect (σ = ), isoquants will be straight lines.
• In general, a production function will exhibit an elasticity of substitution somewhere
between those two extremes (although not all production functions will have a constant
σ for all input combinations). In these cases, isoquants will often be convex to the
origin, exhibiting a greater degree of curvature the lower the elasticity of substitution, σ.
• For a CES production function, we can also relate the elasticity of substitution to the
concept of essentialness. It can be shown that σ = 1/(1 + θ). No input is essential where θ
< 0, and all inputs are essential where θ > 0. Given the relationship between σ and θ, it
can be seen that no input is essential where σ > 1, and all inputs are essential where σ <
1.
• Where σ = 1 (that is, θ = 0), the CES production function collapses to the CD form,
where all inputs are essential.
9. Resource substitutability and the consequences
of increasing resource scarcity
• As production continues throughout time, stocks of non-renewable resources must decline.
Continuing depletion of the resource stock will lead to the non-renewable resource price rising
relative to the price of capital. As the relative price of the non-renewable resource rises the resource
to capital ratio will fall, thereby raising the marginal product of the resource and reducing the
marginal product of capital.
• However, the magnitude of this substitution effect will depend on the size of the elasticity of
substitution. Where the elasticity of substitution is high, only small changes in relative input prices
will be necessary to induce a large proportionate change in the quantities of inputs used. ‘Resource
scarcity’ will be of little consequence as the economy is able to replace the scarce resource by the
reproducible substitute.
• Low substitution possibilities mean that as resource depletion pushes up the relative price of the
resource, the magnitude of the induced substitution effect will be small. ‘Resource scarcity’ will have
more serious adverse effects, as the scope for replacement of the scarce resource by the reproducible
substitute is more limited. Where the elasticity of substitution is zero, then no scope exists for such
replacement.
10. The feasibility of sustainable development
• Is sustainable development actually possible?
• To address this question, two things are necessary.
1. A criterion of sustainability is required.
2. We need to describe the material transformation conditions available to society, now and in the future. These
conditions – the economy’s production possibilities – determine what can be obtained from the endowments of
natural and human-made capital over the relevant time horizon.
• We adopt here a conventional sustainability criterion: non-declining per capita
consumption maintained over indefinite time .
• Turning attention to the transformation conditions, it is clear that a large number of
factors enter the picture.
– What is happening to the size of the human population?
– What kinds of resources are available and in what quantities, and what properties do they possess?
– What will happen to the state of technology in the future?
– How will ecosystems be affected by the continuing waste loads being placed upon the environment, and how will ecosystem
changes feed back upon productive potential?
11. Transformation possibilities
• To make progress, simplify and narrow down the scope of the problem, by making an assumption
about the form of an economy’s production function.
• A series of results have become established for several special cases. For the CD and CES functions
we have the following.
CASE A:
• Output is produced under fully competitive conditions through a CD production function with
constant returns to scale and two inputs, a non-renewable resource, R, and manufactured capital, K,
as in the following special case of above equation:
……..(5)
• Then, in the absence of technical progress and with constant population, it is feasible to have
constant consumption across generations if the share of total output going to capital is greater than
the share going to the natural resource (that is, if α > β).
1
β
α
with
R
K
Q β
α
12. Other cases
Case B:
• Output is produced under fully competitive conditions through a CES production function with
constant returns to scale and two inputs, a non-renewable resource, R, and manufactured capital, K,
as in equation 14.3:
• Then, in the absence of technical progress and with constant population, it is feasible to have
constant consumption across generations if the elasticity of substitution σ = 1/(1 + θ) is greater than
or equal to one.
Case C:
• Output is produced under conditions in which a backstop technology is permanently available. In this
case, the non-renewable natural resource is not essential. Sustainability is feasible, although there
may be limits to the size of the constant consumption level that can be obtained.
1
β
α
with
βR
αK
A
Q
ε/θ
θ
θ
13. Additional matters
• These results assumed that the rate of technical progress and the rate of population
growth were both zero.
• Results change if one or both of these rates is non-zero.
• The presence of permanent technical progress increases the range of circumstances in
which indefinitely long-lived constant per capita consumption is feasible.
• Constant population growth has the opposite effect.
• However, there are circumstances in which constant per capita consumption can be
maintained even where population is growing provided the rate of technical progress is
sufficiently large and the share of output going to the resource is sufficiently low.
• Similarly, for a CES production function, sustained consumption is possible even where
σ < 1 provided that technology growth is sufficiently high relative to population growth.
• The general conclusion is that sustainability requires either a relatively high degree of
substitutability between capital and the resource, or a sufficiently large continuing rate
of technical progress, or the presence of a permanent backstop technology.
14. Sustainability and the Hartwick rule
• John Hartwick (1977, 1978): identified two sets of conditions which were sufficient to
achieve non-declining consumption through time:
1. a particular savings rule, known as the Hartwick rule, which states that the rents derived from
an efficient extraction programme for the non-renewable resource are invested entirely in
reproducible (physical and human) capital;
2. conditions pertaining to the economy’s production technology, described on a previous slide.
• We discuss the implications of the Hartwick rule further in Chapter 19. But three
comments about it are worth making at this point.
1. The Hartwick rule is essentially an ex post description of a sustainable path. Hence if an economy
were not already on a sustainable path, then adopting the Hartwick rule is not sufficient for
sustainability from that point forwards.
2. Even were the economy already on a sustainable path, the Hartwick rule requires that the rents be
generated from an efficient resource extraction programme in a competitive economy.
3. Even if the Hartwick rule is pursued subject to this qualification, the savings rule itself does not
guarantee sustainability. Technology conditions may rule out the existence of a feasible path.
15. The social welfare function and an optimal
allocation of natural resources: model
Social welfare function (SWF)
In general form: (6)
• where Ut, t = 0,. . ., T, is the aggregate utility in period t.
Assume that the SWF is utilitarian in form:
(7)
• This defines social welfare as a weighted sum of the utilities of the relevant aggregate of
individual persons living at a sequence of points in time.
• We assume that utility in each period is a concave function of the level of consumption
in that period, so that Ut = U(Ct) for all t, with UC > 0 and UCC < 0.
T
2
1
0
U
,
...
,
U
,
U
,
U
W
W
T
...
1
U
1
U
1
U
1
U
U
W T
2
2
2
1
1
0
16. SWF in continuous time form with infinite
horizon
• For convenience, we switch from discrete-time to continuous-time notation,
and assume that the relevant time horizon is infinite.
• This leads to the following special case of utilitarian SWF:
•
.......(8)
dt
e
C
U
W ρt
t
0
t
t
17. Constraints
Two constraints that must be satisfied by any optimal solution.
Constraint 1: Resource stock-flow constraint
• The resource stock is to be extracted and used by the end of the time horizon.
• Given this, together with the fact that we are considering a non-renewable resource for which there is
a fixed and finite initial stock, the total use of the resource over time is constrained to be equal to the
fixed initial stock.
• Denoting the initial stock (at t = 0) as S0 and the rate of extraction and use of the resource at time t as
Rt, we can write this constraint as
…(9 and 10)
t
R
dt
dS
S
implies
which
dτ
R
S
S
t
t
t
τ
0
τ
τ
0
t
18. Second constraint: accounting identity relating consumption,
output and the change in the economy’s stock of capital
• Output is shared between consumption goods and capital goods, and so that part of the economy’s
output which is not consumed results in a capital stock change. Writing this identity in continuous-
time form we have:
….(11)
• Given that output is produced through a production function involving two inputs, capital and a non-
renewable resource, Qt = Q(Kt, Rt), we can write the constraint as:
• …(12)
t
t
t
C
Q
K
t
t
t
C
K
Q
K
t
R
,
20. First order conditions
QK (= ∂Q/∂K) and QR (= ∂Q/∂R) are the partial derivatives of output with respect to capital and the non-renewable
resource. (i.e. the marginal products of capital and the resource).
Time subscripts are attached to these marginal products to make explicit the fact that their values will vary over time in
the optimal solution.
The terms Pt and ωt are the shadow prices of the two productive inputs, the natural resource and capital. These two
variables carry time subscripts because the shadow prices will vary over time. The solution values of Pt and ωt, for t = 0,
1, . . ., , define optimal time paths for the prices of the natural resource and capital.
The quantity being maximised in equation 8 is a sum of (discounted) units of utility. Hence the shadow prices are
measured in utility, not consumption (or money income), units.
21. First order conditions
Equation 14.14a: In each period, the marginal utility of consumption
UC,t must be equal to the shadow price of capital ωt . An efficient
outcome will be one in which the marginal net benefit of using one
unit of output for consumption is equal to its marginal net benefit
when it is added to the capital stock.
22. First order conditions
Equation 14.14b: The value of the marginal product of the natural
resource must be equal to the marginal value (or shadow price) of the
natural resource stock, Pt. The value of the marginal product of the
resource is the marginal product in units of output (QR,t) multiplied by
the value of one unit of output(, ωt).
23. Static and dynamic efficiency conditions
The static efficiency conditions
• As with any asset, static efficiency requires that, in each use to which a resource is put, the marginal
value of the services from it should be equal to the marginal value of that resource stock in situ. This
ensures that the marginal net benefit (or marginal value) to society of the resource should be the same
in all its possible uses.
• This is what equations 14(a) and 14(b) imply.
• Equation 14a: In each period, the marginal utility of consumption UC,t must be equal to the shadow
price of capital ωt . An efficient outcome will be one in which the marginal net benefit of using one
unit of output for consumption is equal to its marginal net benefit when it is added to the capital
stock.
• Equation 14b: The value of the marginal product of the natural resource must be equal to the
marginal value (or shadow price) of the natural resource stock, Pt. The value of the marginal product
of the resource is the marginal product in units of output (QR,t) multiplied by the value of one unit of
output(, ωt).
24. The dynamic efficiency conditions
• Dynamic efficiency requires that each asset or resource earns the same rate
of return, and that this rate of return is the same at all points in time, being
equal to the social rate of discount.
• Equations 14.14c and 14.14d ensure that dynamic efficiency is satisfied.
• Equation 14.14c: Dividing each side by P we obtain which states that the
growth rate of the shadow price of the natural resource (that is, its own rate of
return) should equal the social utility discount rate.
• Equation 14.14d: Dividing both sides of 14.14d by ω, we obtain an expression
which states that the return to physical capital (its capital appreciation plus its
marginal productivity) must equal the social discount rate.
25. First order conditions
Equation 14.14c: Dividing each side by P the expression states that
the growth rate of the shadow price of the natural resource (that is, its
own rate of return) should equal the social utility discount rate.
26. First order conditions
Equation 14.14d: Dividing both sides of 14.14d by ω, we obtain an
expression
which states that the return to physical capital (its capital appreciation
plus its marginal productivity) must equal the social discount rate.
t
,
K
t
t
Q
27. Hotelling’s rule: two interpretations
• Equation 14.14c is known as Hotelling’s rule for the extraction of non-renewable
resources. It is often expressed in the form
(15)
• The Hotelling rule is an intertemporal efficiency condition which must be satisfied by
any efficient process of resource extraction.
• A few lines of algebra ( given in the text) yields the following expression:
• which give a second interpretation: the discounted price of the natural resource is
constant along an efficient resource extraction path.
t
t
P
P
0
P
e
P
P t
t
*
t
28. Hotelling’s rule: an implication
• Note the effect of changes in the social discount rate on the
optimal path of resource price.
• The higher is ρ, the faster should be the rate of growth of
the natural resource price.
Look at Appendix 14.2
29. Intuition
• The social discount rate, ρ, reflects impatience for future consumption
• QK (the marginal product of capital) is the pay-off to delayed consumption.
The relations imply that along an optimal path:
1. consumption is increasing when ‘pay-off’ is greater than ‘impatience’;
2. consumption is constant when ‘pay-off’ is equal to ‘impatience’;
3. consumption is decreasing when ‘pay-off’ is less than ‘impatience’.
• Therefore, consumption is growing over time along an optimal path if the marginal product of capital
(QK) exceeds the social discount rate (ρ); consumption is constant if QK = ρ; and consumption
growth is negative if the marginal product of capital is less than the social discount rate. This makes
sense, given that:
1. when ‘pay-off’ is greater than ‘impatience’, the economy will be accumulating K and hence growing;
2. when ‘pay-off’ and ‘impatience’ are equal, K will be constant;
3. when ‘pay-off’ is less than ‘impatience’, the economy will be running down K.
32. Extending the model to incorporate extraction costs
Modelling extraction costs
• Denote total extraction costs as ; the amount of the resource being extracted as R; and remaining
resource stock as S.
• We would expect that will be an increasing function of R. Also, in many circumstances, costs will
depend on the size of the remaining stock of the resource, typically rising as the stock becomes more
depleted.
• Letting St denote the size of the resource stock at time t (the amount remaining after all previous
extraction) we can write extraction costs as
(16)
)
S
,
Γ(R
Γ t
t
t
33. S0
(iii)
t
(for given value of
Rt = )
R
(i)
0
(ii)
Remaining resource stock, St
Figure 4 Three possible examples of the relationship between extraction
costs and remaining stock for a fixed level of resource extraction, R
34. The optimal solution to the resource depletion
model incorporating extraction costs
35.
36.
37.
38. Conclusion
• The presence of costs related to the level of resource extraction raises the gross
price of the resource above its net price but has no effect on the growth rate of
the resource net price.
• In contrast, a resource stock size effect on extraction costs will slow down the
rate of growth of the resource net price.
• In most circumstances, this implies that the resource net price has to be higher
initially (but lower ultimately) than it would have been in the absence of this
stock effect. As a result of higher initial prices, the rate of extraction will be
slowed down in the early part of the time horizon, and a greater quantity of the
resource stock will be conserved (to be extracted later).
39. Generalisation to renewable resources
• Only brief comment here as lengthy analysis of the allocation of
renewable resources covered in Chapters 17 and 18.
• Assume that the amount of natural growth of non-renewable resources,
Gt, is some function of the current stock level, so that Gt = G(St).
• Then write the relationship between the change in the resource stock
and the rate of extraction (or harvesting) of the resource as
(21)
t
t
t
R
S
G
S
40. Generalisation to renewable resources (2)
• The efficiency conditions required by an optimal allocation of resources are now
different from the case of non-renewable resources.
• However, a modified version of the Hotelling rule for rate of change of the net price of
the resource still applies, given by
…..(22)
• Inspection of this modified Hotelling rule for renewable resources demonstrates that the
rate at which the net price should change over time depends upon GS, the rate of change
of resource growth with respect to changes in the stock of the resource.
S
PG
ρP
P
41. Steady-state harvesting
• A steady-state harvesting of a renewable resource exists when all stocks and flows are
constant over time.
• In particular, a steady-state harvest will be one in which the harvest level is fixed over
time and is equal to the natural amount of growth of the resource stock.
• Additions to and subtractions from the resource stock are thus equal, and the stock
remains at a constant level over time.
• If demand for the resource is constant over time, the resource net price will remain
constant in a steady state, as the quantity harvested each period is constant.
• In a steady state, the Hotelling rule simplifies to
ρP = PGS (23)
and so
ρ = GS (24)
42. S
G
G*
0
S*
Figure 5 The relationship between the resource
stock size, S, and the growth of the resource, G
MSY = GMAX
Ŝ
43. Complications & extensions
• The model set up assumes that there is a single, known, finite stock of a non-renewable
resource. Furthermore, the whole stock was assumed to have been homogeneous in
quality. In practice, both of these assumptions are often false.
The following situations are likely:
1. The total stock is not known with certainty.
2. New discoveries increase the known stock of the resource.
3. A distinction needs to be drawn between the physical quantity of the stock and the
economically viable stock size.
4. Research and development, and technical progress, take place, which can change
extraction costs, the size of the known resource stock, the magnitude of economically
viable resource deposits, and estimates of the damages arising from natural resource use.
5. Even when we focus on a particular kind of non-renewable resource, the stock is likely
to be heterogeneous. Different parts of the total stock are likely to be uneven in quality,
or to be located in such a way that extraction costs differ for different portions of the
stock.
44. Backstop technology
• By treating all non-renewable resources as one composite good, our analysis in this
chapter had no need to consider substitutes for the resource in question (except, of
course, substitutes in the form of capital and labour).
• But once our analysis enters the more complex world in which there are a variety of
different non-renewable resources which are substitutable for one another to some
degree, analysis inevitably becomes more complicated.
• One particular issue of great potential importance is the presence of backstop
technologies (see Chapter 15).
• The existence of a backstop technology will set an upper limit on the level to which the
price of a resource can go. If the cost of the ‘original’ resource were to exceed the
backstop cost, users would switch to the backstop.
Editor's Notes
One possible type of production technology is the Cobb–Douglas (CD) form, consisting of the class of functions
Q = AKαRβ
The production function does not contain labour as a productive input; we have omitted labour to keep the algebra as simple as possible. One could choose to interpret K and R as being in per capita units, so that labour does implicitly enter as a productive input.
Matters are not so straightforward with the CES function. We state (but without giving a proof) that if θ < 0 then no input is essential, and if θ > 0 then all inputs are essential.
The elasticity of substitution lies between zero and infinity. Substitution possibilities can be represented diagrammatically. Figure 1 shows what are known as production function isoquants. For a given production function, an isoquant is the locus 3 It can also be shown (see Chiang, 1984, for example) that if resources are allocated efficiently in a competitive market economy, the elasticity of substitution between capital and a non-renewable resource is equal to
. That is, the elasticity of substitution measures the proportionate change in the ratio of capital to non-renewable resource used in response to a change in the relative price of the resource to capital.
The elasticity of substitution lies between zero and infinity.
Substitution possibilities can be represented diagrammatically.
Figure 1 shows what are known as production function isoquants. For a given production function, an isoquant is the locus of all combinations of inputs which, when used efficiently, yield a constant level of output.
Given efficient resource use in a competitive economy, the elasticity of substitution measures the proportionate change in the ratio of capital to non-renewable resource used in response to a change in the relative price of the resource to capital.
Intuition: For the CD case, although the natural resource is always essential in the sense we described above, if α > β then capital is sufficiently substitutable for the natural resource so that output can be maintained by increasing capital as the depletable resource input diminishes. However, it should be noted that there is an upper bound on the amount of output that can be indefinitely sustained in this case; whether that level is high enough to satisfy ‘survivability’ is another matter.
For the CES case, if σ > 1, then the resource is not essential. Output can be produced even in the absence of the natural resource.
The fact that the natural resource is finite does not prevent indefinite production (and consumption) of a constant, positive output.
Where σ = 1, the CES production function collapses to the special case of CD, and so Case A applies.
Where a backstop exists (such as a renewable energy source like wind or solar power, or perhaps nuclear-fusion-based power) then it is always possible to switch to that source if the limited natural resource becomes depleted.
We explore this process further in the next chapter.
Comment 1 severely reduces the practical usefulness of the ‘rule’. (See Asheim, 1986, and Pezzey, 1996, and Appendix 19.1 in the present book.)
Comment 3: As we noted in a previous slide, feasibility depends very much upon the extent of substitution possibilities open to an economy.
Notice that the utility function itself is not dependent upon time, so that the relationship between consumption and utility is the same in all periods.
Writing the SWF in this form assumes that it is meaningful to refer to an aggregate level of utility for all individuals in each period. Then social welfare is a function of these aggregates, but not of the distribution of utilities between individuals within each time period. That is a very strong assumption, and by no means the only one we might wish to make. We might justify this by assuming that, for each time period, utility is distributed in an optimal way between individuals.
Equation 9 states that the stock remaining at time t (St) is equal to the magnitude of the initial stock (S0) less the amount of the resource extracted over the time interval from zero to t (given by the integral term on the right-hand side of the equation).
Equation10 has a straightforward interpretation: the rate of depletion of the stock, , is equal to the rate of resource stock extraction, Rt.
Before we discuss the economic interpretations of these equations, it is necessary to explain several things about the notation used and the nature of the solution:
The terms QK (= ∂Q/∂K) and QR (= ∂Q/∂R) are the partial derivatives of output with respect to capital and the non-renewable resource. In economic terms, they are the marginal products of capital and the resource, respectively. Time subscripts are attached to these marginal products to make explicit the fact that their values will vary over time in the optimal solution.
The terms Pt and ωt are the shadow prices of the two productive inputs, the natural resource and capital. These two variables carry time subscripts because the shadow prices will vary over time. The solution values of Pt and ωt, for t = 0, 1, . . ., , define optimal time paths for the prices of the natural resource and capital.
The quantity being maximised in equation 14.8 is a sum of (discounted) units of utility. Hence the shadow prices are measured in utility, not consumption (or money income), units. You should now turn to Box 14.2 where an explanation of the relationship between prices in utils and prices in consumption (or income) units is given.
A shadow price is a price that emerges as a solution to an optimisation problem; put another way, it is an implicit or ‘planning’ price that a good (or in this case, a productive input) will take if resources are allocated optimally over time. If an economic planner were using the price mechanism to allocate resources over time, then {Pt} and {ωt}, t = 0, 1, .. ., , would be the prices he or she should establish in order to achieve an efficient and optimal resource allocation.
Equation 14a. This states that, in each period, the marginal utility of consumption UC,t must be equal to the shadow price of capital ωt (remembering that prices are measured in units of utility here). A marginal unit of output can be used for consumption now (yielding UC,t units of utility) or added to the capital stock (yielding an amount of capital value ωt in utility units). An efficient outcome will be one in which the marginal net benefit of using one unit of output for consumption is equal to its marginal net benefit when it is added to the capital stock.
Equation 14b states that the value of the marginal product of the natural resource must be equal to the marginal value (or shadow price) of the natural resource stock. This shadow price is, of course, Pt. The value of the marginal product of the resource is the marginal product in units of output (i.e. QR,t) multiplied by the value of one unit of output, ωt. But we have defined ωt as the price of a unit of capital; so why is this the value of one unit of output? The reason is simple. In this economy, units of output and units of capital are in effect identical (along an optimal path). Any output that is not consumed is added to capital. So we can call ωt either the value of a marginal unit of capital or the value of a marginal unit of output.
In other words, Hotelling’s rule states that the discounted value of the resource should be the same at all dates. But this is merely a special case of a general asset–efficiency condition; the discounted (or present value) price of any efficiently managed asset will remain constant over time. This way of interpreting Hotelling’s rule shows that there is nothing special about natural resources per se when it comes to thinking about efficiency. A natural resource is an asset. All efficiently managed assets will satisfy the condition that their discounted prices should be equal at all points in time. If we had wished to do so, the Hotelling rule could have been obtained directly from this general condition.
Optimality in resource extraction
The astute reader will have noticed that we have described the Hotelling rule (and the other conditions described above) as an efficiency condition. But a rule that requires the growth rate of the price of a resource to be equal to the social discount rate does not give rise to a unique price path. This should be evident by inspection of Figure 14.3, in which two different initial prices, say 1 util and 2 utils, grow over time at the same discount rate, say 5%. If ρ were equal to 5%, each of these paths – and indeed an infinite quantity of other such price paths – satisfies Hotelling’s rule, and so they are all efficient paths. But only one of these price paths can be optimal, and so the Hotelling rule is a necessary but not a sufficient condition for optimality.
How do we find out which of all the possible efficient price paths is the optimal one? An optimal solution requires that all of the conditions listed in equations 14.14a–d, together with initial conditions relating to the stocks of capital and resources and terminal conditions (how much stocks, if any, should be left at the terminal time), are satisfied simultaneously. So Hotelling’s rule – one of these conditions – is a necessary but not sufficient condition for an optimal allocation of natural resources over time.
Let us think a little more about the initial and final conditions for the natural resource that must be satisfied. There will be some initial resource stock; similarly, we know that the resource stock must converge to zero as elapsed time passes and the economy approaches the end of its planning horizon. If the initial price were ‘too low’, then this would lead to ‘too large’ amounts of resource use in each period, and all the resource stock would become depleted in finite time (that is, before the end of the planning horizon). Conversely, if the initial price were ‘too high’, then this would lead to ‘too small’ amounts of resource use in each period, and some of the resource stock would (wastefully) remain undepleted at the end of the planning horizon. This suggests that there is one optimal initial price that would bring about a path of demands that is consistent with the resource stock just becoming fully depleted at the end of the planning period.
In conclusion, we can say that while equations 14s are each efficiency conditions, taken jointly as a set (together with initial values for K and S) they implicitly define an optimal solution to the optimisation problem, by yielding unique time paths for Kt and Rt and their associated prices that maximise the social welfare function.
The relationship denoted (i) corresponds to the case where the total extraction cost is independent of the stock size. In this case, the extraction cost function collapses to the simpler form t = 1(Rt) in which extraction costs depend only on the quantity extracted per period of time.
In case (ii), the costs of extracting a given quantity of the resource increase linearly as the stock becomes increasingly depleted. S = ∂/∂S is then a constant negative number.
Finally, case (iii) shows the costs of extracting a given quantity of the resource increasing at an increasing rate as S falls towards zero; S is negative but not constant, becoming larger in absolute value as the resource stock size falls. This third case is the most likely one for typical non-renewable resources.
It is common to assume that the relationship between the resource stock size, S, and the growth of the resource, G, is as indicated in Figure 5. This relationship is explained more fully in Chapter 17.
As the stock size increases from zero, the amount of growth of the resource rises, reaches a maximum, known as the maximum sustainable yield (MSY), and then falls. Note that GS = dG/dS is the slope at any point of the growth–stock function in Figure 5.
Suppose that we are currently using some non-renewable resource for a particular purpose – perhaps for energy production. It may well be the case that another resource exists that can substitute entirely for the resource we are considering, but may not be used at present because its cost is relatively high. Such a resource is known as a backstop technology. For example, renewable power sources such as wind energy are backstop alternatives to fossil-fuel-based energy.