Extraction path and sustainability

Abstract

This paper offers an approach to construct a family of extraction paths for nonrenewables that guarantee long-run sustainability of an imperfect economy. A path from this family leads to a monotonic growth of output with a decreasing rate of growth if a sustainability condition holds. Otherwise, the path leads either to a bounded decline or U-shaped path of output. In this sense, the paper extends neoclassical results and provides a bridge between neoclassical and degrowth theories because neoclassical tools are used to quantify degrowth scenarios. The offered path can be incentive-compatible for climate change problems because it reduces the extraction of polluting minerals consistently with the IPCC goals. That is, the climate-benefiting emission cuts by the parties of climate agreements may be guided by purely "egoistic" motives-to make own economies long-run sustainable.) is less than one. Then where is a magic trick?Recall that Hartwick (2003) stated that "This result is local in time" and the production function must be "with substitutability among inputs." 8 An example below illustrates general issues 9 reflected in these disclaimers. The example considers a non-optimal economy under (i) and (ii) with the data that are close to real economies. The point of interest is the effect of changes in while other parameters, including the resource-labor and capital-labor substitutabilities, are fixed. Calculations are provided in Appendix A.