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Maximin: a direct approach to sustainability

Published online by Cambridge University Press:  17 May 2006

ROBERT D. CAIRNS  and
NGO VAN LONG
ROBERT D. CAIRNS
Affiliation:
Department of Economics, McGill University, 855 Sherbrooke St. W., Montreal, Canada H3A 2T7. Tel: (514) 398-4850. Fax: (514) 398-4938. E-mail: robert.cairns@mcgill.ca; ngo.long@mcgill.ca
NGO VAN LONG
Affiliation:
Department of Economics, McGill University
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Abstract

We solve directly a general maximin (sustainment, intergenerational-equity) problem. Because the shadow values of a maximin problem do not correspond to the shadow values from a general discounted-utility solution, they correspond to the prices of only a very special competitive economy. Virtual discount factors for the economy arise. They do not correspond to hyperbolic discount factors. Hartwick's rule is derived and generalized naturally to take into account non-autonomous and non-deterministic features of the economy. Under uncertainty, Hartwick's rule is the analytic expression of a form of precautionary principle. Hotelling's rule is a necessary condition, but may be more complex than has been appreciated in simple models. Some interpretations of strong sustainment are special cases of weak sustainment but, paradoxically, may be more difficult to solve.

Type
Research Article
Information
Environment and Development Economics , Volume 11 , Issue 3 , June 2006 , pp. 275 - 300
Copyright
© 2006 Cambridge University Press

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Footnotes

We thank Urs Brandt, Jon Conrad, Kim Long, the late Philippe Michel, Tapan Mitra, Robert Solow, Koichi Suga, Franz Wirl and three referees for helpful comments and FCAR and SSHRCC for financial support.