Intertemporal Market Equilibrium and Intergenerational Efficiency with Renewable Resources

Abstract

It is widely held that self–interest under the pressure of market competition leads individuals to overexploit and even exhaust renewable resources world-wide. We know however from Chap. 1 that the empirical evidence, at least for non–renewable resources, is much more mixed, i.e. does not generally support this claim. It is the main objective of this chapter to show that theoretical considerations also suggest that we need to exercise considerable caution and judgement when making claims of this sort. Indeed, it would appear that theoretical support is only forthcoming here when no suitable property right regime exists for the renewable resource. Hence, the empirically observed misuse of natural resources is not per se the result of individual self interest and market competition. On the other hand, for many renewable resources it is often hard in practice to define and implement property rights capable of preventing self–interested individuals, acting under conditions of market competition, from overusing renewable resources.