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Is an Exhaustible Resource Economy Sustainable?

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  • Y. Hossein Farzin

Abstract

The paper focuses on two alternative concepts of sustainability dominating the literature: (i) maximum permanently maintainable consumption level (Fisherian income) and (ii) the amount of consumption that leaves total value of wealth intact (Hicksian income). In the context of a pure exhaustible resource economy, the author derives an explicit relationship between the two sustainability criteria and shows that while such an economy is not sustainable in the former sense, it is in the latter sense provided social preferences are represented by a logarithmic utility function. The implications of the two concepts for greening of national income are derived. Finally, the paper shows the range of values of the parameters of the model for which the utilitarian optimal path can be close to paths satisfying the alternative sustainability criteria, suggesting that such outcomes are less likely for very poor resource‐dependent countries than for the rich ones.

Suggested Citation

  • Y. Hossein Farzin, 2004. "Is an Exhaustible Resource Economy Sustainable?," Review of Development Economics, Wiley Blackwell, vol. 8(1), pages 33-46, February.
    • Handle: RePEc:bla:rdevec:v:8:y:2004:i:1:p:33-46
    DOI: 10.1111/j.1467-9361.2004.00218.x
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    References listed on IDEAS

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    1. Thomas Aronsson & Per-Olav Johansson, 1997. "Welfare Measurement, Sustainability and Green National Accounting," Books, Edward Elgar Publishing, number 1240.
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    1. Y. Hossein Farzin, 2010. "Sustainability, Optimality, and Development Policy," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 262-281, May.
    2. Craig Bond & Y. Farzin, 2008. "Alternative Sustainability Criteria, Externalities, and Welfare in a Simple Agroecosystem Model: A Numerical Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(3), pages 383-399, July.
    3. Valeria Costantini & Salvatore Monni, 2005. "Measuring Human Development and Environmental Sustainability in European Countries," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
    4. Bond, Craig A. & Farzin, Y. Hossein, 2004. "A Portfolio Of Nutrients: Soil And Sustainability," 2004 Annual meeting, August 1-4, Denver, CO 20035, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Y. Hossein Farzin & Ken-Ichi Akao, 2006. "When is it Optimal to Exhaust a Resource in a Finite Time?," Working Papers 2006.23, Fondazione Eni Enrico Mattei.
    6. Y. Hossein Farzin, 2007. "Sustainability and Optimality in Economic Development: Theoretical Insights and Policy Prospects," Working Papers 2007.89, Fondazione Eni Enrico Mattei.

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