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This is a single-good model, that is, output is of one good which can be either consumed or added to capital. The dynamic optimisation problem is to maximise the discounted present value of utility, utility being a function of consumption meeting the standard conditions $U_C > 0$ and $U_{CC} < 0$. Perman et al identify the second of two state ...

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It would be easy enough to subject the question to simple quantitative analysis - get the time-series of historical oil prices and away we go. Or, we can take a quick qualitative approach and get the same answer: The Rule just sets out what the most economically efficient path would be. That's nothing at all to do with how things happen in reality: it's ...

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I think you could have posted the question in a simpler manner. The exhaustible resource stock has nothing to do with the question. It is just the basic Euler equation in canonical Solow growth model. Basically, if your pure rate of time preference $\rho$ (equivalently, your patience level) is higher than the interest rate of capital ($\rho>Q_{k}$), it ...

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I got stock with this problem for days. The fact is that in a statical analysis, increasing $Q_K$ reduces consumption. But in a dynamic analysis, increasing $Q_K$ means more capital is saved and hence next year an higher production function that allows for more consumption than today, hence, a positive growth rate of consumption.

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I believe this comes from a very beginning of the book, which tries to emphasize the concept of scarcity... a very important idea in economics. Later on, you'll see that there are certain types of goods that, when one person "consumes" it, it doesn't mean that other people cannot consume it as well. In economics, this is called a non-rivalry good. Some ...

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Some examples you might consider: Fine art when the artist dies (this doesn't reduce the number of works by that artist, but does reduce the number of works that can be expected to exist in the future) The electromagnetic spectrum - there are a bunch of interesting resources concerning auctions for space on the spectrum Short .com domain names

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First of all Hartwick's rule has originally been derived under rather specific assumptions, among others a Cobb-Douglas production function and constant population and technology. Therefore copying it one on one to the real world would require a huge leap of faith. Although it has later been generalized to broader classes of production functions, people have ...

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Smith pointed out that as wealth was growing in any nation, the rate of profit would tend to fall and investment opportunities would diminish. Source The first half of the sentence makes it clear that this is not about steady state economies, as wealth is still growing. my question can be rephrased in a simpler way: If the economy was/became a ...

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Two things: The price reduction on the polluting good helps consumers of the polluting good, but also hurts producers of the polluting good. This results in less output and, in the extreme, market exit by the least-efficient polluting firms. A full analysis would be needed to show which effect wins in the end as far as overall emissions go. This is ...

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Your intuition is correct, actually switching from dirty good to clean good will also increase demand for clean good so price there might increase as well. However, this does not mean doing some voluntary change could not help as it also depends on how the quantity demanded changes with price (elasticity of demand). So switching is not necessarily unhelpful. ...

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I would say that (a) follows from a downward sloping demand curve that causes marginal revenue to decline faster than price. As you write a monopolist accounts for that and to maximize profits thus extracts less to drive up the price. That also explains why generally exploitation would take longer. That this is not always the case is shown by Stiglitz's (...

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For zero investment, $\delta = 0.05$ and $\theta =1$ and $\theta = 0.9$ we get We see that it is still a slowing depreciation, which reflects the assumption that capital is more productive in its first years of usage (since depreciation is the mirror image of productive contribution), an assumption good enough for capital equipment with moving parts (and ...

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