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Institutional Structures and Policies in an Environment of Increasingly Scarce and Expensive Resources: A Fixed Cost Perspective

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  • Jing Chen
  • James Galbraith

Abstract

In this paper, we provide a model that permits systematic and even quantitative assessment of the policy implications of increasingly scarce and expensive resources. Specifically, we model the return to investment as a function of fixed cost, discount rate, uncertainty, project duration and the volume of output. Institutions can be understood as the accumulation of past fixed investments, which lower the variable cost of economic activities but constrain choices open to future policymakers. How much to invest in fixed assets and how institutions respond to a changing environment are the key questions as the cost of nonrenewable resources rises.

Suggested Citation

  • Jing Chen & James Galbraith, 2011. "Institutional Structures and Policies in an Environment of Increasingly Scarce and Expensive Resources: A Fixed Cost Perspective," Journal of Economic Issues, Taylor & Francis Journals, vol. 45(2), pages 301-308.
    • Handle: RePEc:mes:jeciss:v:45:y:2011:i:2:p:301-308
    DOI: 10.2753/JEI0021-3624450206
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    Cited by:

    1. Ayres, Robert U. & van den Bergh, Jeroen C.J.M. & Lindenberger, Dietmar & Warr, Benjamin, 2013. "The underestimated contribution of energy to economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 27(C), pages 79-88.
    2. Fontana, Giuseppe & Sawyer, Malcolm, 2016. "Towards post-Keynesian ecological macroeconomics," Ecological Economics, Elsevier, vol. 121(C), pages 186-195.
    3. Jing Chen, 2013. "Population, Migration, Living Standard and Social Pressure: A Modeling Approach from Thermodynamics," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 11(3), pages 345-349.
    4. Jing Chen & James K. Galbraith, 2024. "Production: a biophysical and evolutionary theory," Review of Evolutionary Political Economy, Springer, vol. 5(1), pages 85-119, June.
    5. Chen, Jing, 2012. "The nature of discounting," Structural Change and Economic Dynamics, Elsevier, vol. 23(3), pages 313-324.
    6. Jalil, Abdul, 2014. "Energy–growth conundrum in energy exporting and importing countries: Evidence from heterogeneous panel methods robust to cross-sectional dependence," Energy Economics, Elsevier, vol. 44(C), pages 314-324.

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