Abstract
We study an optimal growth model for a single resource based economy. The resource is governed by the standard model of logistic growth, and is related to the output of the economy through a Cobb-Douglas type production function with exogenously driven knowledge stock. The model is formulated as an infinite-horizon optimal control problem with unbounded set of control constraints and non-concave Hamiltonian. We transform the original problem to an equivalent one with simplified dynamics and prove the existence of an optimal admissible control. Then we characterize the optimal paths for all possible parameter values and initial states by applying the appropriate version of the Pontryagin maximum principle. Our main finding is that only two qualitatively different types of behavior of sustainable optimal paths are possible depending on whether the resource growth rate is higher than the social discount rate or not. An analysis of these behaviors yields general criterions for sustainable and strongly sustainable optimal growth (w.r.t. the corresponding notions of sustainability defined herein).
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
D. Acemoglu, Introduction to Modern Economic Growth (Princeton University Press, Princeton NJ, 2009)
S.M. Aseev, Adjoint variables and intertemporal prices in infinite-horizon optimal control problems. Proc. Steklov Inst. Math. 290, 223–237 (2015a)
S.M. Aseev, On the boundedness of optimal controls in infinite-horizon problems. Proc. Steklov Inst. Math. 291, 38–48 (2015b)
S.M. Aseev, Existence of an optimal control in infinite-horizon problems with unbounded set of control constraints. Trudy Inst. Mat. i Mekh. UrO RAN 22(2), 18–27 (2016) (in Russian)
S.M. Aseev, A.V. Kryazhimskiy, The Pontryagin maximum principle and transversality conditions for a class of optimal control problems with infinite time horizons. SIAM J. Control Optim. 43, 1094–1119 (2004)
S.M. Aseev, A.V. Kryazhimskii, The Pontryagin maximum principle and optimal economic growth problems. Proc. Steklov Inst. Math. 257, 1–255 (2007)
S. Aseev, T. Manzoor, Optimal growth, renewable resources and sustainability, International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria, WP-16-017, 29 pp., 2016
S.M. Aseev, V.M. Veliov, Maximum principle for infinite-horizon optimal control problems with dominating discount. Dyn. Contin. Discrete Impuls. Syst. Ser. B Appl. Algorithms 19, 43–63 (2012)
S.M. Aseev, V.M. Veliov, Needle variations in infinite-horizon optimal control, in Variational and Optimal Control Problems on Unbounded Domains, ed. by G. Wolansky, A.J. Zaslavski. Contemporary Mathematics, vol. 619 (American Mathematical Society, Providence, 2014), pp. 1–17
S.M. Aseev, V.M. Veliov, Maximum principle for infinite-horizon optimal control problems under weak regularity assumptions. Proc. Steklov Inst. Math. 291(supplement 1), 22–39 (2015)
S.M. Aseev, K.O. Besov, A.V. Kryazhimskii, Infinite-horizon optimal control problems in economics. Russ. Math. Surv. 67(2), 195–253 (2012)
G.B. Asheim, T. Mitra, Sustainability and discounted utilitarianism in models of economic growth. Math. Soc. Sci. 59(2), 148–169 (2010)
E.J. Balder, An existence result for optimal economic growth problems. J. Math. Anal. Appl. 95, 195–213 (1983)
R.J. Barro, X. Sala-i-Martin, Economic Growth (McGraw Hill, New York, 1995)
Brundtland Commission, Our common future: report of the world commission on evironment and development, United Nations, 1987
D.A. Carlson, A.B. Haurie, A. Leizarowitz, Infinite Horizon Optimal Control. Deterministic and Stochastic Systems (Springer, Berlin, 1991)
L. Cesari, Optimization – Theory and Applications. Problems with Ordinary Differential Equations (Springer, New York, 1983)
A.F. Filippov, Differential Equations with Discontinuous Right-Hand Sides (Kluwer, Dordrecht, 1988)
P. Hartman, Ordinary Differential Equations (J. Wiley & Sons, New York, 1964)
H. Hotelling, The economics of exhaustible resources. J. Polit. Econ. 39, 137–175 (1974)
T. Manzoor, S. Aseev, E. Rovenskaya, A. Muhammad, Optimal control for sustainable consumption of natural resources, in Proceedings, 19th IFAC World Congress, vol.19, part 1 (Capetown, South Africa, 24–29 August, 2014), ed. by E. Boje, X. Xia, pp. 10725–10730 (2014)
P. Michel, On the transversality conditions in infinite horizon optimal problems. Econometrica 50,975–985 (1982)
L.S. Pontryagin, V.G. Boltyanskii, R.V. Gamkrelidze, E.F. Mishchenko, The Mathematical Theory of Optimal Processes (Pergamon, Oxford, 1964)
F.P. Ramsey, A mathematical theory of saving. Econ. J. 38, 543–559 (1928)
R.M. Solow, A contribution to the theory of economic growth. Q. J. Econ. 70 (1), 65–94 (1956)
S. Valente, Sustainable development, renewable resources and technological progress. Environ. Resour. Econ. 30(1), 115–125 (2005)
Acknowledgements
This work was initiated when Talha Manzoor participated in the 2013 Young Scientists Summer Program (YSSP) at IIASA, Laxenburg, Austria. T. Manzoor is grateful to Pakistan National Member Organization for financial support during the YSSP. Sergey Aseev was supported by the Russian Science Foundation under grant 15-11-10018 in developing of methodology of application of the maximum principle to the problem.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2018 Springer International Publishing AG, part of Springer Nature
About this chapter
Cite this chapter
Aseev, S., Manzoor, T. (2018). Optimal Exploitation of Renewable Resources: Lessons in Sustainability from an Optimal Growth Model of Natural Resource Consumption. In: Feichtinger, G., Kovacevic, R., Tragler, G. (eds) Control Systems and Mathematical Methods in Economics. Lecture Notes in Economics and Mathematical Systems, vol 687. Springer, Cham. https://doi.org/10.1007/978-3-319-75169-6_11
Download citation
DOI: https://doi.org/10.1007/978-3-319-75169-6_11
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-75168-9
Online ISBN: 978-3-319-75169-6
eBook Packages: Economics and FinanceEconomics and Finance (R0)