The transformation space analyzed in chapter 3 describes the production possibilities of two private goods and the public good “environmental quality.” All combinations of the transformation space can be attained. But which set of outputs should be sought? In order to answer this question, we must introduce value judgments that eventually allow us to determine the desired set of outputs.
KeywordsEnvironmental Quality Abatement Cost Pareto Optimum Shadow Price Competitive Equilibrium
Unable to display preview. Download preview PDF.
- 1.On welfare criteria, compare Quirk and Saposnik (1968). The “maximin” criterion suggested by Rawls (1971) has received considerable attention in the analysis of resource use, especially in an intertemporal context. Compare Fisher (1981) p. 71. On ethical issues also compare Kneese and Schulze (1985).Google Scholar
- 2.Alternatively, we could define UI as the environmental quality used by individual j. Then we would have to observe the restraint U 1 = U 2 = U.Google Scholar
- 3.For a model with an explicit diffusion function and negative externalities, compare Siebert (1975a).Google Scholar
- 4.Rewrite equation 4.6g as Google Scholar
- 5.On a general equilibrium with explicit consideration of the environment also compare Dudenhöffer (1983), Mäler (1985) and Pethig (1979).Google Scholar
- 6.On the technique of nonlinear optimization, compare A.C. Chiang, Fundamental Methods of Mathematical Economics (New York: McGraw-Hill, 3rd edition, 1984); M.D. Intriligator, Mathematical Optimization and Economic Theory (Englewood Cliffs, N.J.: Prentice-Hall, 1971), chap. 4; A. Takayama, Mathematical Economics (New York: The Dryden Press, 1974), chap. 1.Google Scholar