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How could the non-sustainable Easter Island have been sustained?

Author

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  • Cyrus Chu, C.Y.
  • Lai, Ching-Chong
  • Liao, Chih-Hsing

Abstract

The collapsing scenario of Easter Island has been analyzed by Brander and Taylor (1998) as a predator–prey model in a Malthusian world, in which the household is only concerned with its instantaneous utility. This paper develops an endogenous growth model with a renewable resource and analyzes the possibly non-sustainable growth as a steady state, in spite of the household being deeply concerned with all its future lifetime utility. Our analysis shows that the ignorance of future lifetimes in present decision-making is indeed crucial to economic non-sustainability. We then examine whether a deforestation tax set by the government could have reduced the resource exploration rate and thereby held back the economic collapse. We also demonstrate using phase-diagrams how such a tax can switch the economic dynamics from non-sustainability to sustainability.

Suggested Citation

  • Cyrus Chu, C.Y. & Lai, Ching-Chong & Liao, Chih-Hsing, 2014. "How could the non-sustainable Easter Island have been sustained?," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 161-174.
    • Handle: RePEc:eee:reveco:v:34:y:2014:i:c:p:161-174
    DOI: 10.1016/j.iref.2014.08.007
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    More about this item

    Keywords

    Endogenous growth; Environmental policy; Renewable resources;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry

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