Sustainable growth: Compatibility between criterion and the initial state

Abstract

There is a large body of research devoted to our understanding of sustainable growth in resource based economies. Some of this research is inapplicable to the real economy. This is a result of inconsistency between the commonly used criteria and the initial state of the real economy. The inconsistency can lead to either inferior, unsustainable, or nonexistent optimal paths of consumption per capita if the criterion is not linked to the initial state. We demonstrate this in a model of the Dasgupta-Heal-Solow-Stiglitz variety with the constant consumption per capita as a benchmark criterion. Our results show that the inconsistency in this case can imply Pareto inferior paths of consumption per capita.essential nonrenewable resource; sustainable extraction; criterion inconsistency; Hartwick Rule