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The green golden rule: Habit and anticipation of future consumption

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  • Faria, João Ricardo
  • McAdam, Peter

Abstract

We derive the Green Golden Rule (GGR) in the Habit Formation (HF) and Anticipation of Future Consumption (AFC) frameworks. Since consumption is the key variable of GGR, time non-separabilities in preferences over consumption streams, given by the AFC and HF, may have important impacts on the environment and sustainability. We demonstrate that agents who smooth their consumption patterns, according to the HF hypothesis, are more likely to preserve the environment than those who anticipate future consumption or who do not so smooth consumption.

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  • Faria, João Ricardo & McAdam, Peter, 2018. "The green golden rule: Habit and anticipation of future consumption," Economics Letters, Elsevier, vol. 172(C), pages 131-133.
    • Handle: RePEc:eee:ecolet:v:172:y:2018:i:c:p:131-133
    DOI: 10.1016/j.econlet.2018.08.026
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    4. João Ricardo Faria & Peter Mcadam, 2013. "Anticipation of Future Consumption: A Monetary Perspective," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(2‐3), pages 423-447, March.
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    Cited by:

    1. Busato, Francesco & Chiarini, Bruno & Cisco, Gianluigi & Ferrara, Maria, 2021. "Greta Thunberg effect and Business Cycle Dynamics: A DSGE model," MPRA Paper 110141, University Library of Munich, Germany.
    2. Joao R. Faria & Peter Mcadam & Bruno Viscolani, 2023. "Monetary Policy, Neutrality, and the Environment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(7), pages 1889-1906, October.
    3. Attílio, Luccas Assis & Faria, João Ricardo & Rodrigues, Mauro, 2023. "Does monetary policy impact CO2 emissions? A GVAR analysis," Energy Economics, Elsevier, vol. 119(C).
    4. Manuel A. Gómez, 2022. "The good, the bad and the worse: current, past and future consumption externalities and equilibrium efficiency," Journal of Economics, Springer, vol. 137(3), pages 195-228, December.
    5. Laszlo Goerke, 2021. "Habit formation and wage determination," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 61-76, January.
    6. Goerke, Laszlo, 2020. "An Efficiency-Wage Model with Habit Concerns about Wages," IZA Discussion Papers 13454, Institute of Labor Economics (IZA).
    7. Gómez, Manuel A., 2021. "On the closed-form solution of an endogenous growth model with anticipated consumption," Journal of Mathematical Economics, Elsevier, vol. 95(C).
    8. Francesco Busato & Bruno Chiarini & Gianluigi Cisco & Maria Ferrara, 2023. "Green preferences," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(4), pages 3211-3253, April.
    9. Bibaswan Chatterjee & Rolando Escobar‐Posada & Goncalo Monteiro, 2023. "Anticipation in leisure—Effects on labor‐leisure choice," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(2), pages 384-412, June.
    10. Vivien Glönkler & Benedikt Reick & Ralf Stetter & Markus Till & Markus Pfeil, 2022. "A Contribution to Sustainable Product Development Using the Example of Battery Electric Vehicles," Sustainability, MDPI, vol. 14(7), pages 1-27, March.

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    More about this item

    Keywords

    Sustainability; Environment; Resources; Growth;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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