Abstract
In the last chapter some evidence has been presented that seems to negate the existence of an unambiguous or even an unambiguously negative relationship between real per capita income and the level of physical environmental quality associated with it. The question immediately suggesting itself is: what are the economic determinants of the state of the environment? And in particular: why have environmental turn-arounds taken place?
It is no paradox to say that in ourmost theoretical moods we may be nearest to our most practical applications. A.N. Whitehead.
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Quoted by Motz and Weaver (1993), p. 247.
Strictly speaking, “pollution” in this quotation should be replaced by “emission”. While the level of pollution may depend on a number of environmental conditions and on the properties of the pollutants in question, emissions are the result of human activities alone. However, many authors use both terms interchangeably.
Details about the oil price crises are taken from Hartwick and Olewiler (1986), ch. 7.
The Hotelling rule, for instance, states that a nonrenewable resource is extracted efficiently if its shadow price rises at a rate equal to the market rate of interest, provided that a number of conditions are met [e.g. Devarajan and Fisher (1981)]. The difference between the shadow price and the market price is often taken to be the (constant or rising) marginal cost of extracting the resource [e.g. Slade (1982), Hartwick (1990], so it can be inferred from the shadow price on the market price. Efficient depletion of a nonrenewable resource hence implies a rising resource market price which represents an incentive to economise on the resource, possibly even to do without it. If the resource use harms the environment, an inverted U-curve for pollution may result.
Since the households’ true marginal willingness to pay may still be higher than what they reveal, only a lower bound of the marginal private value of environmental quality can be determined empirically.
It is assumed that K(0) is small enough for optimal growth to be positive. The precise condition for this to apply will be derived in chapter 3.
The Mangasarian sufficiency theorem requires ℋ to be jointly concave in all states and controls. A weaker condition is provided by Arrow’s sufficiency theorem [e.g. Chiang (1992), pp. 214-221].
Instead of assuming the utility function to be linearly homogeneous, many authors approximate it by taking a first-order Taylor expansion around the optimum, essentially linearising the utility function.
Partial derivatives of explicit functions are written using the symbol “∂”, e.g. ∂E/∂A. To distinguish them from derivatives of implicit functions, “∂” is replaced by “d” in the latter, e.g. dA/dK. A confusion with total differentials such as dE=(∂E/∂A)dA + (∂E/∂K)dK should not arise.
That there are no oscillations around that level follows from P = Ė — δP =-δP which says that the curvature does not change in the course of convergence.
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© 1999 Springer-Verlag Berlin Heidelberg
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Vogel, M.P. (1999). Economic Determinants of Environmental Quality Changes. In: Environmental Kuznets Curves. Lecture Notes in Economics and Mathematical Systems, vol 469. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-58517-3_2
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DOI: https://doi.org/10.1007/978-3-642-58517-3_2
Publisher Name: Springer, Berlin, Heidelberg
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