Time-consistent resource management with regime shifts

We investigate how a resource user who is present-biased manages a renewable resource stock with variable growth that could undergo a reversible regime shift (an abrupt, persistent change in structure and function of the ecosystem supplying the resource). In a discrete-time quasihyperbolic discounting framework with no commitment device, and using only generic utility functions and stock transition with regime shifts, we show that there is…

Everything is relative and nothing is certain. Toward a theory and practice of comparative probabilistic LCA

Introduction It is widely recognized that LCA is in most cases relative and contains uncertainties due to choices and data. This paper analyses the combination of the two comparative uncertainties. Basic concepts We carefully define the idea of relativity and uncertainty within LCA. We finish off by giving an example of case where inappropriate handling of comparative uncertainties will lead to a misleading result for…

The Economy, The Biosphere and Planetary Boundaries: Towards Biosphere Economics

Nine planetary boundaries have been proposed, capturing essential biophysical processes that sustain the Earth System and its biosphere in an accommodating state for humanity. Drawing on economics literature, we propose conditions under which remaining within these boundaries is in line with economic policy. We assert that pervasive uncertainties combined with impacts of trespassing planetary boundaries clearly legitimate using safe minimum standards or precautionary approaches. Moreover,…

Managing renewable resources facing the risk of regime shifts

Resource management has to take account of the possibility of regime shifts in the ecological system that provides the resource. Regime shifts are uncertain and lead to structural changes in the system dynamics, lowering the productivity of the resource. Optimal management is driven by two considerations. First, it becomes more precautionary in case a higher stock of the renewable resource decreases the hazard rate of…

Regime Shifts and Uncertainty in Pollution Control

We develop a simple model of managing a system subject to pollution damage under risk of an abrupt and random jump in the damage coefficient. The model allows the full dynamic characterization of the optimal emission policies under uncertainty. The results, that imply prudent behavior due to uncertainty, are compared with the ambiguous outcomes reported in the literature for similar models. The differences are explained…

Who wants to save the Baltic Sea when the success is uncertain?

Recent research shows that the Baltic Sea has experienced an ecosystem change and is now in a degraded state with respect to water quality. Moreover, it is uncertain whether this deterioration is reversible. The purpose of the study is to analyze how people respond to this type of uncertainty when asked if they would be willing to pay something in order to make it possible…

Intergenerational resource transfers with random offspring numbers

A problem common to biology and economics is the transfer of resources from parents to children.Weconsider the issue under the assumption that the number of offspring is unknown and can be represented as a random variable. There are 3 basic assumptions. The first assumption is that a given body of resources can be divided into consumption (yielding satisfaction) and transfer to children. The second assumption…

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