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Abstract:
I propose an economically coherent analysis of corporate social responsibility (CSR), and suggest how it is reflected in financial markets. CSR is defined as a program of actions taken to reduce externalized costs or to avoid distributional conflicts. It is an institution that has evolved in response to market failures, a Coasian solution to some problems associated with social costs. The analysis suggests that there is a resource-allocation role for CSR programs in cases of market failure through private-social cost differentials, and also in cases where distributional disagreements are likely to be strong. In some sectors of the economy private and social costs are roughly in line and distributional debates are unusual: here corporate social responsibility has little role to play. Such sectors are outnumbered by those where CSR can play a valuable role in ensuring that the invisible hand acts, as intended, to produce the social good. It can also act to improve corporate profits and guard against reputational risks.

Corporate social responsibility, CSR, risk management, socially responsible investment, SRI, environmental responsibility

Abstract:
An economy faces an unknown individual risk, such as the health effects of a recently discovered environmental hazard. Opinions may be widely different about the distribution of risks across the population. We study financial markets that suffice to reach efficient allocations in this situation. The problem is formalized in a general equilibrium economy with incomplete markets. Introducing an array of mutual insurance policies and of "statistical securities" is shown to lead to Pareto efficient allocations. By combining insurance contract for individual risks and securities markets for collective risks, the proposed institutional framework economizes significantly on the number of markets required for efficiency. The computational complexity of a market equilibrium is reduced from an NP - complete (i.e., intractable) problem to one which depends polynomially on the number of households.

Abstract:
An economy faces an unknown individual risk, such as the health effects of a recently discovered environmental hazard. Opinions may be widely different about the distribution of risks across the population. We study financial markets that suffice to reach efficient allocations in this situation. The problem is formalized in a general equilibrium economy with incomplete markets. Introducing an array of mutual insurance policies and of "statistical securities" is shown to lead to Pareto efficient allocations. By combining insurance contract for individual risks and securities markets for collective risks, the proposed institutional framework economizes significantly on the number of markets required for efficiency. The computational complexity of a market equilibrium is reduced from an NP - complete (i.e. intractable) problem to one which depends polynomially on the number of households.

Abstract:
We study paths which involve optimal use of a renewable resource under several alternative definitions of optimality, including the discounted utilitarian, Chichilnisky's, the Rawlsian and the green golden rule. Initially we consider an economy where the only good is the resource: subsequently, we embed the resource in a productive economy with capital accumulation. Our aim is to investigate how the alternative approaches contribute to the understanding of the issues underlying concerns about sustainable use of the earth's resources. We show that Chichilnisky's criterion has several interesting characteristics: it leads the economy to asymptote to the green golden rule (the configuration giving the highest sustainable utility level) and requires that the discount rate fall asymptotically to zero, which can be interpreted as an application to intertemporal preferences of the well-known Webe-Fechner law of physics and physiology.

Abstract:
We study paths which involve optimal use of a renewable resource under several alternative definitions of optimality, including the discounted utilitarian, Chichilnisky's, the Rawlsian and the green golden rule. Initially we consider an economy where the only good is the resource: subsequently, we embed the resource in a productive economy with capital accumulation. Our aim is to investigate how the alternative approaches contribute to the understanding of the issues underlying concerns about sustainable use of the earth's resources. We show that Chichilnisky's criterion has several interesting characteristics: it leads the economy to asymptote to the green golden rule (the configuration giving the highest sustainable utility level) and requires that the discount rate fall asymptotically to zero, which can be interpreted as an application to intertemporal preferences of the well-known Weber-Fechner law of physics and physiology.

Abstract:
Sustainability is an important, influential but elusive concept. I review concepts related to sustainability in earlier literature and then summarize and synthesize recent work on sustainability by Chichilnisky (1993), Beltratti, Chichilnisky and Heal (1994), and Heal (1993). This provides a basis for formalizing the concept and operationalizing it via shadow prices and associated accounting practices.

Abstract:
Sustainability is an important, influential but elusive concept. I review concepts related to sustainability in earlier literature, and then summarize and synthesize recent work on sustainablity by Chichilnisky (1993), Beltratti, Chichilnisky and Heal (1994) and Heal (1993). This provides a basis for formalizing the concept and operationalizing it via shadow prices and associated accounting practices.

Abstract:
In the paper we review the concept of national income and the economic theory of national income accounting. There are two building blocks - the ideas of Fisher, Lindahl, Hicks about income as an expenditure level that can be continued into the future, and the concept of income as a welfare measure that emerges from the welfare economics and general equilibrium of the 1950s and 1960s. The former have led to an extensive literature on the use of Hamiltonians or their first order approximations as an income measure. After reviewing this body of theory and the connections between the concepts, we suggest extensions and then consider how various proposed green accounting systems match up to the theoretical desiderata. We also review a number of empirical applications. We devote considerable space to the United Nations' proposed System of Economic and Environmental Accounts, and to accounting reforms proposed by the statistical offices of various countries.

National income, green accounting, Hamiltonian, welfare economics, Hicksian income, environmental accounting

Abstract:
In the paper we review the concept of national income and the economic theory of national income accounting. There are two building blocks - the ideas of Fisher, Lindahl, Hicks about income as an expenditure level that can be continued into the future, and the concept of income as a welfare measure that emerges from the welfare economics and general equilibrium of the 1950s and 1960s. The former have led to an extensive literature on the use of Hamiltonians or their first order approximations as an income measure. After reviewing this body of theory and the connections between the concepts, we suggest extensions and then consider how various proposed green accounting systems match up to the theoretical desiderata. We also review a number of empirical applications. We devote considerable space to the United Nations' proposed System of Economic and Environmental Accounts, and to accounting reforms proposed by the statistical offices of various countries.

National income, green accounting, Hamiltonian, welfare economics, Hicksian income, environmental accounting

Abstract:
Reduction of the earth's biodiversity as a result of human activities is a matter of great concern to prominent scientists. What are the economic aspects of this loss? In economic terms, what is biodiversity and why might it matter? And is the loss of biodiversity in any way connected with globalization of the economy.

Biodiversity, public goods, globalization, bundling

Abstract:
Does the present concern about sustainability raise fundamentally new issues for economics, or is it dealing with problems already on our agenda? There are two points that are central to sustainability: a concern for what happens in the long-run, and a respect for the constraints that the natural world places on the dynamics of human societies and the well-being of their members. Concern for the long-run has a long and distinguished history in economics, going back to Sidgwick, Ramsey, Koopmans and others. We have not resolved these issues fully, but they are not new. Concern for the ecological limitations on society is a matter of specifying properly the constraints under which society operates. This does not raise fundamentally novel issues, although the precise specification of these constraints, which could involve non-convexities and hysteresis, could be challenging. Here I explore optimal growth paths for economies with various specifications of the objectives and constraints, and ask whether optimal paths are sustainable in a loose and intuitive sense. The answer is frequently affirmative. I argue that in fact most optimal paths are sustainable, using the terms optimal and sustainable in ways that command general assent.

optimal growth, sustainability, sustainable development, ecological constraints, environment

Abstract:
The value of the services provided to human societies by natural ecosystems and biogeochemical cycles has recently been the topic of discussion and research. Here I review some of the basic economic principles necessary for understanding some of the questions that arise in this area. I argue that even with the best possible data and scientific understanding, the sense in which economists can value nature's services is limited. I also argue that valuing these services is much less important than providing incentives for their conservation, and that valuation and providing incentives for conservation are quite different. Valuation is neither necessary nor sufficient for conservation, whereas providing the right incentives is.

Ecosystems, ecosystem services, valuation, incentives, conservation

Abstract:
The value of the services provided to human societies by natural ecosystems and biogeochemical cycles has recently been the topic of discussion and research. Here I review some of the basic economic principles necessary for understanding some of the questions that arise in this area. I argue that even with the best possible data and scientific understanding, the sense in which economists can value nature's services is limited. I also argue that valuing these services is much less important than providing incentives for their conservation, and that valuation and providing incentives for conservation are quite different. Valuation is neither necessary nor sufficient for conservation, whereas providing the right incentives is.

Ecosystems, ecosystem services, valuation, incentives, conservation

Abstract:
I review the complex welare economic issues that arise in environmental decision-making over very long periods of time, as in the case of climate change, biodiversity loss and nuclear waste disposal. I also consider the questions that have to be resolved in choosing a discount rate to apply to very long-run projects and indicate how such rates should be chosen.

Environment, welare economics, intergenerational equity, discount rate, climate change, biodiversity, Rawls, utilitarianism

Abstract:
I review the complex welare economic issues that arise in environmental decision-making over very long periods of time, as in the case of climate change, biodiversity loss and nuclear waste disposal. I also consider the questions that have to be resolved in choosing a discount rate to apply to very long-run projects and indicate how such rates should be chosen.

Environment, welare economics, intergenerational equity, discount rate, climate change, biodiversity, Rawls, utilitarianism

Abstract:
In this article, we focus on the potential of governmental
authorities dedicated to management of ecosystem services. We
argue that the creation of such Ecosystem Service Districts (ESDs) will improve the efficient provision of services necessary for human welfare. At the moment, when agencies manage for natural resources, they typically do so in a defined geographical area or district. Given the prevalence and importance of districts for soil conservation, resource conservation, flood control, and other local services, we explain how ESDs could provide a coherent and efficient governmental institution for monitoring and investing in natural capital. A focus on ESDs would create a mechanism to help ensure that natural capital is protected and maintained with the same care and concern as that given to built and human capital.

Establishing and managing ESDs will involve an exploration of the underlying ecological processes that provide the services, of the economic significance of the services, and of the legal issues involved in managing natural ecosystems for the good of a local or regional community. Central in all these analyses will be land use decisions. Land use determines which of the initial ecosystems and services are maintained intact. In addition, many of the key trade-offs between the continued functioning of natural ecosystems and the extension of economic activities arise naturally in the context of land-use choices, such as farming versus forestation, development versus conservation, etc.

In examining the geographical, economic, and legal obstacles in designing ESDs, we suggest an integrative framework for managing the patterns of land use in a district that can provide several different ecosystem services, and that also has the potential to support many different types of economic activity, some of which can conflict with the continued integrity of the natural ecosystems. Part I of the article explains the why ecosystem services are under threat and the potential benefits of managing their conservation through ESDs. Part II lays out the basic ecological-economic framework and principles for district design. Part III sets out the key legal issues and Part IV presents a tentative roadmap of how to put theory into practice. The importance of ecosystem services is no longer disputed. How to realize more fully their value, and hence their conservation, however, remains an active research area. ESDs, though fraught with challenges, provide a potentially powerful institutional mechanism to address the relative neglect of ecosystem services in public policy by bringing their crucial importance into focus and aiding in their preservation.

Ecosystem services, public goods, natural capital, environment, legal framework, environmental law

Abstract:
In this article, we focus on the potential of governmental authorities dedicated to management of ecosystem services. We argue that the creation of such Ecosystem Service Districts (ESDs) will improve the efficient provision of services necessary for human welfare. At the moment, when agencies manage for natural resources, they typically do so in a defined geographical area or district. Given the prevalence and importance of districts for soil conservation, resource conservation, flood control, and other local services, we explain how ESDs could provide a coherent and efficient governmental institution for monitoring and investing in natural capital. A focus on ESDs would create a mechanism to help ensure that natural capital is protected and maintained with the same care and concern as that given to built and human capital.

Establishing and managing ESDs will involve an exploration of the underlying ecological processes that provide the services, of the economic significance of the services, and of the legal issues involved in managing natural ecosystems for the good of a local or regional community. Central in all these analyses will be land use decisions. Land use determines which of the initial ecosystems and services are maintained intact. In addition, many of the key trade-offs between the continued functioning of natural ecosystems and the extension of economic activities arise naturally in the context of land-use choices, such as farming versus forestation, development versus conservation, etc.

In examining the geographical, economic, and legal obstacles in designing ESDs, we suggest an integrative framework for managing the patterns of land use in a district that can provide several different ecosystem services, and that also has the potential to support many different types of economic activity, some of which can conflict with the continued integrity of the natural ecosystems. Part I of the article explains the why ecosystem services are under threat and the potential benefits of managing their conservation through ESDs. Part II lays out the basic ecological-economic framework and principles for district design. Part III sets out the key legal issues and Part IV presents a tentative roadmap of how to put theory into practice. The importance of ecosystem services is no longer disputed. How to realize more fully their value, and hence their conservation, however, remains an active research area. ESDs, though fraught with challenges, provide a potentially powerful institutional mechanism to address the relative neglect of ecosystem services in public policy by bringing their crucial importance into focus and aiding in their preservation.

Ecosystem services, public goods, natural capital, environment, legal framework, environmental law

Abstract:
Uncertainty is pervasive in analysis of climate change. How should economists allow for this? And how have they allowed for it? This paper reviews both of these questions.

Climate change, uncertainty, risk

Abstract:
Uncertainty is pervasive in analysis of climate change. How should economists allow for this? And how have they allowed for it? This paper reviews both of these questions.

Climate change, uncertainty, risk

Abstract:
Many firms go reduce their impact on the environment more than is legally required - that is, they overcomply with environmental regulations. There is clearly a cost to this, so there has to be a benefit too. I suggest that firms are consciously internalizing external costs, with a view to reducing the potential for conflict between themselves and other groups in society. The avoidance of such conflicts can pay off in the long-run in terms of stock market valuation, relations with regulators and consumer perception of the company's products.

corporate social responsibility, external effects, corporate environmentalism

Abstract:
The world of public goods has changed in the last quarter century. Many of the changes have their origins in massively increased human impacts on the biosphere, and in particular on important life support systems such as the carbon cycle, and on resources such as biodiversity, which operate as public goods that are privately provided. These goods have quite particular characteristics that may enhance the possibility of reaching durable international agreements concerning their provision. Adoption spillovers are important in this context: they can mitigate the normal free rider effect associated with public good provision. The private production of these public goods makes it natural to seek to use markets to manage their provision.

Public goods, global, environment, free rider, international agreement, fixed costs, adoption spillover

Abstract:
I review cases in which developers have chosen to conserve local environmental amenities as part of a profit-oriented strategy. The proximity of these amenities adds more to the value of the property than could have been gained by destroying them and building more residences. I show that this is consistent with a theoretical proposition not previously noted: a price discriminating monopolistic supplier of a private good that may be bundled with a local public good should provide the public and private goods at a Pareto efficient level: there is no underprovision of the public good in this case. Even though there is no market for the public good the fact that its provision alters customers' willingness to pay for the private good will ensure that it is provided efficiently, provided that this willingness to pay can be captured by the seller of the private goods.

local public goods, bundling, price discrimination, monopoly, environment, conservation, urban development

Abstract:
Reduction of the earth's biodiversity as a result of human activities is a matter of great concern to prominent scientists. What are the economic aspects of this loss? In economic terms, what is biodiversity and why might it matter? And is the loss of biodiversity in any way connected with globalization of the economy?

Biodiversity, Public Goods, Globalization, Bundling

Abstract:
Biodiversity provides essential services to human societies. Many of these services are provided as public goods, so that they will typically be underprovided both by market mechanisms (because of the impossibility of excluding non-payers from using the services) and by government-run systems (because of the free rider problem). I suggest here that in some cases the public goods provided by biodiversity conservation can be bundled with private goods and their value to consumers captured in the price realized by the private goods. This may lead to an efficient level of provision.

Local Public Goods, Bundling, Price Discrimination, Monopoly, Environment, Urban Development

Abstract:
This paper extends our earlier analysis of interdependent security issues to a general class of problems involving discrete interdependent risks with heterogeneous agents. There is a threat of an event that can only happen once, and the risk depends on actions taken by others. Any agent's incentive to invest in managing the risk depends on the actions of others. Security problems at airlines and in computer networks come into this category, as do problems of risk management in organizations facing the possibility of bankruptcy, and individuals' choices about whether to be vaccinated against an infectious disease. Surprisingly the framework also covers certain aspects of investment in R&D. Here we characterize Nash equilibria with heterogeneous agents and give conditions for tipping and cascading of equilibria.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
This paper extends our earlier analysis of interdependent security issues to a general class of problems involving discrete interdependent risks with heterogeneous agents. There is a threat of an event that can only happen once, and the risk this poses to any one agent depends on actions taken by others. Thus any agent's incentive to invest in managing the risk also depends on the actions of others. Security problems at airlines and in computer networks come into this category, as do problems of risk management in organizations facing the possibility of bankruptcy, and individuals' choices about whether to be vaccinated against an infectious disease. Surprisingly the framework also covers certain aspects of investment in R&D. Here we characterize Nash equilibria with heterogeneous agents and give conditions for tipping and cascading of equilibria.

Nash equilibrium, tipping, cascading, terrorism, security, interdependence

Abstract:
I establish an extension of the classical general equilibrium treatment of uncertainty about exogenous states to price uncertainty. Traders do not know the prices at which trade will occur, but have expectations over possible prices. They trade derivatives, price-contingent securities, to insure against the risks arising from this uncertainty. I establish three results: one is a set of necessary and sufficient conditions for the existence of equilibrium, called an equilibrium with price insurance, in such a framework; another is the fact that equilibria with price insurance are Pareto efficient and agents insure themselves optimally against the price uncertainty represented by their price expectations; and finally we show that in this framework agents' price expectations matter, in the sense that they affect the equilibrium allocation of resources.

Derivatives, price uncertainty, endogenous uncertainty, general equilibrium, Hilbert space, price expectations.

Abstract:
Do firms have adequate incentives to invest in anti-terrorism mechanisms? This paper develops a framework for addressing this issue when the security choices by one agent affect the risks faced by others. We utilize the airline security problem to illustrate how the incentive by one airline to invest in baggage checking is affected by the decisions made by others. Specifically if an airline believes that others will not invest in security systems it has much less economic incentive to do so on its own. Private sector mechanisms such as insurance and liability will not necessarily lead to an efficient outcome. To induce adoption of security measures one must turn to regulation, taxation or institutional coordinating mechanisms such as industry associations. We compare the airline security example with problems having a similar structure (i.e., computer security and fire protection) as well as those with different structures (i.e., theft protection and vaccinations). The paper concludes with suggestions for future research.

externalities, contagion, terrorism, Nash equilibrium

Abstract:
We model tipping as a game-theoretic phenomenon and investigate the connection between supermodular games, tipping of equilibria and cascading, and apply the results to issues that arise in the context of homeland security and computer security. We show that tipping and cascading can occur in supermodular games and that increasing differences is a sufficient condition for tipping. Supermodularity and tipping of equilibria are closely related. We relate our results to Schelling's early work on tipping.

tipping, security, supermodularity, increasing differences, cascading, interdependence, networks

Abstract:
In a finite-horizon general equilibrium model national income is the value of output at supporting prices and a perturbation increases welfare if and only if it raises national income. National income therefore serves as both a welfare measure and a cost-benefit criterion. We construct a measure with these properties for an infinite horizon representative agent model (following suggestions by Fisher and by Samuelson), and relate it to a debate about how to measure welfare in a dynamic model, how to measure green national income, and how to measure sustainability. Our measure has all the right properties - it measures national income, provides an if and only if welfare increase criterion (thus integrating national income accounting and cost-benefit analysis), and acts as a good indicator of sustainability. It is observable and has been measured for a number of countries. Our index is a Fisherian wealth measure and our results represent the completion of a research agenda set out by Samuelson in 1961.

representative agent, national income, wealth, sustainability, cost-benefit

Abstract:
I model the impact of mitigation banking accompanied by Safe Harbor provisions on a land-owner's choices about supporting a population of an endangered species. The Safe Harbor provision is equivalent to a free call option on a population with market value, and mitigation banking can allow a land-owner with an endangered species to arbitrage between land without and with permission to develop. A land-owner whose land is not zoned for development may therefore stand to benefit from the discovery of an endangered species on his land.

Endangered Species, Arbitrage, Options, Habitat, Mitigation Banking

Abstract:
This paper studies countries' incentives to develop advanced pollution abatement technologies when technology may spill over across countries, and pollution abatement is a global public good. First, we show that at the Nash equilibrium of a simultaneous-move game with R&D investment and emission abatement, whether the free rider effect prevails and under-investment and excess emissions occur, as conventional wisdom suggests, depends on the degree of technology spillovers and the effect of R&D on the marginal abatement costs. Then we consider a treaty participation game where treaty members cooperate in R&D and emission reduction, and show that whether the treaty members gain by preventing technology spillovers to non-members also depends on the effect of R&D on the marginal abatement costs. Technology diffusion to non-member is not necessarily welfare-reducing: whether it increases the equilibrium global welfare depends on the marginal abatement costs, marginal damages, and the cost of R&D.

International environmental agreement, technology innovation and spillovers

Abstract:
We review the properties of the conventional static measure of changes in economic welfare, national income, in a dynamic economy. We show that it is possible to establish attractive welfare properties by rather simple arguments and that this variable can be estimated from current data. Its welfare properties are identical to those of the static measure: a small change is a potential Pareto improvement if and only if it leads to an increase in this variable. This gives national income welfare properties that are much preferable to those of net national product.

representative agent, national income, wealth, sustainability, cost-benefit.

Abstract:
This paper studies countries' incentives to develop advanced pollution abatement technology when technology may spillover across countries and pollution abatement is a global public good. We are motivated in part by the problem of global warming: a solution to this involves providing a global public good, and will surely require the development and implementation of new technologies. We show that at the Nash equilibrium of a simultaneous-move game with R&D investment and emission abatement, whether the free rider effect prevails and under-investment and excess emissions occur depends on the degree of technology spillovers and the effect of R&D on the marginal abatement costs. There are cases in which, contrary to conventional wisdom, Nash equilibrium investments in emissions reductions exceed the first-best case.

International Environmental Agreement, Pollution Abatement Costs, Endogenous Technological Change

Abstract:
Greater use of renewable energy is seen as a key component of any move to combat climate change, and is being aggressively promoted as such by the new U.S. administration and by other governments. Yet there is little economic analysis of renewable energy. This paper surveys what is written and adds to it. The conclusion is that the main renewables face a major problem because of their intermittency (the wind doesn't always blow nor the sun always shine) and that this has not been adequately factored into discussions of their potential. Without new storage technologies that can overcome this intermittency, much of the decarbonization of the economy will have to come from nuclear, carbon capture and storage (CCS) and energy efficiency (geothermal and biofuels can make small contributions). Nuclear and CCS are not without their problems. New energy storage technologies could greatly increase the role of renewables, but none are currently in sight.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
What have we learned from the outpouring of literature as a result of the Stern Review of the Economics of Climate Change? A lot. We have explored the model space and the parameter space much more thoroughly, though there are still unexplored regions. While there are aspects of the Stern Review's analysis with which we can disagree, it seems fair to say that it has catalyzed a fundamental rethinking of the economic case for action on climate change. We are now in a position to give some conditions that are sufficient to provide a case for strong action on climate change, but need more work before we have a fully satisfactory account of the relevant economics. In particular we need to understand better how climate change affects natural capital - the natural environment and the ecosystems comprising it - and how these affect human welfare.

Abstract:
In an interdependent world the risks faced by any one agent depend not only on its choices but also on those of all others. Expectations about others' choices will influence investments in risk-management, and the outcome can be sub-optimal investment all round. We model this as the Nash equilibrium of a game and give conditions for such a sub-optimal equilibrium to be tipped to an optimal one. We also characterize the smallest coalition to tip an equilibrium, the minimum critical coalition, and show that this is also the cheapest critical coalition, so that there is no less expensive way to move the system from the sub- optimal to the optimal equilibrium. We illustrate these results by reference to airline security, the control of infectious diseases via vaccination and investment in research and development.

Abstract:
Do firms have adequate incentives to invest in anti-terrorism mechanisms? This paper develops a framework for addressing this issue when the security choices by one agent affect the risks faced by others. We utilize the airline security problem to illustrate how the incentive by one airline to invest in baggage checking is affected by the decisions made by others. Specifically if an airline believes that others will not invest in security systems it has much less economic incentive to do so on its own. Private sector mechanisms such as insurance and liability will not necessarily lead to an efficient outcome. To induce adoption of security measures one must turn to regulation, taxation or institutional coordinating mechanisms such as industry associations. We compare the airline security example with problems having a similar structure (i.e., computer security and fire protection) as well as those with different structures (i.e., theft protection and vaccinations). The paper concludes with suggestions for future research.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Abstract:
The World of Oil Market, Past and Future

Abstract:
This paper analyzes the effect of taxation on the intertemporal allocation of an exhaustible resource. A general framework within which a large variety of taxes can be analyzed is developed and then applied to a number of specific taxes. It is shown that there exists a pattern of taxation which can generate essentially any desired pattern of resource usage. Many tax policies, however, have effects which are markedly different both from the effects that these policies would have in the case of produced commodities and from those which they are designed (or widely thought) to have. For instance, if extraction costs are zero, a depletion allowance at a constant rate (widely thought to encourage the extraction of resources) has absolutely no effect; its gradual removal (usually thought to be preferable to a sudden removal) leads to faster rates of depletion (and lower prices) now, but higher prices in the future; which its sudden and unanticipated removal has absolutely no distortionary effect on the pattern of extraction. More generally, it is shown that the effects of tax structure on the patterns of extraction are critically dependent on expectations concerning future taxation. The changes in tax structure which have occurred in the past fifty years are of the kind that, if they were anticipated, (or if similar further changes are expected to occur in the future) lead to excessively fast exploitation of natural resources. However, if it is believed that current tax policies (including rates) will persist indefinitely, the current tax structure would lead to excessive conservationism. Thus, whether in fact current tax policies have lead to excessive conservationism is a moot question.

Abstract:
No abstract is available for this paper.

Abstract:
We model tipping as a game-theoretic phenomenon and investigate the connection between supermodular games, tipping of equilibria and cascading, and apply the results to issues that arise in the context of homeland security and computer security. We show that tipping and cascading can occur in supermodular games and that "increasing differences"is a sufficient condition for tipping. Supermodularity and tipping of equilibria are closely related. We relate our results to Schelling’s early work on tipping.

Abstract:
We study a growth model with an environmental asset which is a source of utility and an input to consumption and production. The stock of this asset follows its own ecological dynamics, which are affected by economic activity.

We study the implications of an approach to ranking sequences of consumption and environment over time that place weight both on the characteristics of the sequence over any finite period and on its very long run or limiting characteristics. Chichilnisky [5] has called these "sustainable preferences". The criterion shows more intertemporal symmetry than the discounted utilitarian approach, which clearly emphasizes the immediate future at the expense of the long run. ln this respect Chichilnisky's criterion captures some other concerns of those who argue for sustainability and for a heightened sense of responsibility to the future. To characterize optimal paths we define the "green golden rule", the path which maximizes long-run sustainable utility from consumption and environment.

Abstract:
It has been said that insurance is the last of the financial services to accept radical change (Denney [1995-1996]). Yet there has been a fundamental shift in the geographic location and in the organization of the reinsurance industry in the last six years (Chichilnisky [1996b]). Global environmental risks are partly responsible For this change; increased weather volatility and catastrophic risks are difficult to diversify using traditional insurance practices.

Abstract:
New risks seem to be an unavoidable in a period of rapid change. The last few decades have brought us the risks of global warming, nuclear meltdown, ozone depletion, failure of satellite launcher rockets, collision of supertankers, AIDS and Ebola. A key feature of a new risk, as opposed to an old and familiar one, is that one knows little about it. In particular, one knows little about the chances or the costs of its occurrence. This makes it hard to manage these risks: existing paradigms for the rational management of risks require that we associate probabilities to various levels of losses. This poses particular challenges for the insurance industry which is at the leading edge of risk management. Misestimation of new risks has lead to several bankruptcies in the insurance and reinsurance businesses.: In this paper we propose a novel framework for providing insurance cover against risks whose parameters are unknown. In fact many of the risks at issue may be not just unknown but also unknowable: it is difficult to imagine repetition of the events leading to global warming or ozone depletion, and, therefore, difficult to devise a relative frequency associated with repeated experiments.

Abstract:
There are many social situations in which the actions of different agents reinforce each other. These include network effects and the threshold models used by sociologists (Granovetter, Watts) as well as Leibenstein's bandwagon effects. We model such situations as a game with increasing differences, and show that tipping of equilibria as discussed by Schelling, cascading and Dixit's results on clubs with entrapment are natural consequences of this mutual reinforcement. If there are several equilibria, one of which Pareto dominates, then we show that the inefficient equilibria can be tipped to the efficient one, a result of interest in the context of coordination problems.

Abstract:
This paper reviews a range of issues relating to tradeable carbon dioxide quotas. It considers the economic principles on which they are based, compares them with alternative carbon abatement policies, and reviews many aspects of how tradeable quotas would be implemented in practice.

Abstract:
The paper studies a two-region economy, with two sectors and three factors of production: oil, capital and labor. The South exports oil in exchange for industrial goods from the North. There is a net capital inflow to the South. This equals the difference between its export revenues and import costs, and represents the South's indebtedness. This overseas borrowing finances the development of the oil sector: increased borrowing leads to higher oil supplies, to new levels of consumption and a new distribution of income in the South, as well as to new levels of exports from the North. The paper studies the macro impacts of changes in the value of the debt on both the borrowing and the lending regions. The results are illustrated by simulations with data for the U.S.A. and Mexico.

Abstract:
No abstract is available for this paper.

Abstract:
We use growth models with natural resources to study the consequences of a ranking of intertemporal paths, due to Chichilnisky, which places weight on their very long run or limiting characteristics as well as on their characteristics over any finite period. This criterion shows more intertemporal symmetry or egalitarianism than the discounted utilitarian approach, which clearly emphasizes the immediate future at the expense of the long run. In this respect it captures the concerns of those who argue for sustainability and for a heightened sense of responsibility to the future. In some of the examples that we consider, the Iong-run characteristics of paths optimal by this criterion are a mixture of those of utilitarian paths and the "green golden rule" (the configuration which maximizes long-run sustainable utility from consumption and environment).

Abstract:
Industrial companies and environmentalists are traditional opponents. But conflict may not he necessary: there is money to be made in projects that embrace environmental goals.

Abstract:
We introduce the concept of a strategic dictator and use it to analyze patterns of power in two-pperson games that arise naturally in bargaining, arbitration, and incentive problems, a strategic dictator is an agent who has the power to ensure that at Nash equilibrium outcome is his or her preferred outcome. but who may have to lie in order to do this. We discuss applications of our analysis to Stackelberg and Cournot Duopolists. to bargaining situations, and to the existence of appropriate incentive systems.

Abstract:
In international circles. the concem of the day is with the state of the world economy. There is a general appreciation ofthe severity ofthe problem, but no widespread agreement about either diagnosis or solutions. We shall focus here on a particular set of topics that have emerged as major issues during the last decade, and that also seem central to an understanding of the present economic situation. A characteristic of these topics is that they link international and domestic policy areas in so integral a way that neither can be analyzed in isolation from the other.

Abstract:
We present a restriction on the domain of individual preferences that is both necessary and sufficient of the existence of it social choice rule that is continuous, anonymous, and respects unanimity. The restriction is that the space of preferences be contractible. Contractibility admits it straightforward intuitive explanation, and is a generalization of conditions such as single peakedness, value restrictedness and limited agreement, which were earlier shown to be sufficient for majority voting to be an acceptable rule. The only restriction on the number of individuals is that it be finite and at least 2.

Abstract:
OUR CONCERN in this paper is to analyze the optimal long-run pricing policies of oil-exporting countries. These might be described briefly as the policies which best meet their objectives, subject to the various limitations imposed on them by the realities of world economic forces.

The objectives of the oil-exporting countries have been conveniently summarized in earlier discussions in OPEC Seminars (see Sepahban, 1982), under the following four headings:

1. The conservation of hydrocarbon resources.
2. Accelerated economic and social development of their domestic
economics, and in particular rapid capital formation.
3. Improved terms of trade with industrial countries.
4. Maintenance of reasonable rates of economic growth for the international
community, including industrial countries.

Abstract:
This paper articulates and applies frameworks for examining whether consumption is excessive. We consider two criteria for the possible excessiveness (or insufficiency) of current consumption. One is an intertemporal utility-maximization criterion: actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility. The other is a sustainability criterion, which requires that current consumption be consistent with non-declining living standards over time. We extend previous theoretical approaches by offering a formula for the sustainability criterion that accounts for population growth and technological change. In applying this formula, we find that some poor regions of the world are failing to meet the sustainability criterion: in these regions, genuine wealth per capita is falling as investments in human and manufactured capital are not sufficient to offset the depletion of natural capital.

Sustainability, overconsumption, genuine investment, genuine savings, genuine wealth

Abstract:
Agriculture is one of the main drivers of environmental change. It is the source of many changes in land use and the origin of a broad range of pollutants. We can usefully think of the impact of agriculture on the environment, and of the interrelationship between the two, by thinking of agriculture as a producer and consumer of ecosystem services. Viewing the environment as natural capital, we see that ecosystems are capital assets, and embody production technologies that are valuable, complex, and often poorly understood. Patterns of agricultural use affect the quantity and quality of services that they deliver. Ecosystems deliver multiple types of services across widely varying spatial scales, so that patterns of agricultural use across many different scales matter. Efficient delivery of alternative environmental services or 'crops' such as carbon sequestration, water quality, and wildlife habitat requires distinctive institutional forms, and an intellectual integration of ecology into agricultural economics.

Abstract:
The extent of genetic diversity in food crops is important as it affects the risk of attack by pathogens. A drop in diversity increases this risk. Farmers may not take this into account when making crop choices, leading to what from a social perspective is an inadequate level of diversity.

Genetic diversity, agriculture, Nash equilibrium, external effect

Abstract:
What is the nature of biodiversity as an economic commodity and why does it matter? How would its conservation contribute economically to our well being? I consider three issues:

Why is biodiversity important from an economic perspective?

What kind of commodity is it?

Does our usual economic mechanism, the market system, have the capacity to appreciate the economic value of biodiversity?

I first characterize biodiversity from an economic perspective, and then consider the capacity of our main economic institutions to realize the value of biodiversity and ensure that it is treated in a way commensurate with its importance.

Abstract:
A single condition, limited arbitrage, is shown to be necessary and sufficient for the existence of a competitive equilibrium and the core in economies with any number of markets, finite or infinite, with or without short sales. This extends earlier results of Chichilnisky [8] for finite economies. This unification of finite and infinite economies is achieved by proving that in Hilbert spaces limited arbitrage is necessary and sufficient for the compactness of the Pareto frontier. Limited arbitrage has also been shown to be necessary and sufficient for a resolution of the social choice paradox [9], [10], [12], [13], [14], and for the non-emptiness of the core.

Abstract:
Increasing returns is the source of some of the most powerful metaphors and intuitions in economics. Foremost among them are Adam Smith's statement that the division of labor is limited by the extent of the market and his discussion of the relationship between scale and economies of specialization in a pin factory. There is a weakness, strictly an error, in Adam Smith's analysis. Two phenomena that he grouped together and saw as integral to economic progress are in fact inconsistent. These are increasing returns with the consequent gains from specialization and the efficiency of the invisible hand. We now know that a society cannot have both, at least if one interprets the efficiency of the invisible hand as the Pareto efficiency of the competitive equilibrium, our only rigorous interpretation. This paper reviews the implications of increasing returns for several areas of economics: resource allocation and welfare economics; the micro foundations of macroeconomics; product variety and imperfect competition; information and information technology; economic growth; international trade. These cover the fields in which increasing returns cause departures from the results otherwise available. These departures are rather significant. Recognizing increasing returns affects the possibility of market equilibrium, can introduce sticky prices, causes economies to lock-in to inefficient technologies and introduce path-dependence, affects the possibility of continuing growth, produces hard problems for regulators, and changes our conception of the effects of international trade. All in all, increasing returns can change quite radically our view of how the economy operates. They make the economy seem more complicated and pose a challenge to our vision of a benign and powerful invisible hand.

Abstract:
Climate risks have always been amongst the most important faced by human societies. Today the concern has new elements: the global nature of possible changes and the fact that they are driven by human activity. The risks posed by climate change are therefore endogenous and so outside of the classical economic framework for analyzing risk allocation. They are also poorly understood and correlated and concern events that may be irreversible. We review the problem that these characteristics pose for efficient allocation of such risks and conclude that financial markets for suitable securities, together with mutual insurance contracts, can provide effective insurance. We also ask how much a society should spend reducing the probability of climate change, a question that cannot be asked in the Arrow-Debreu framework in which the frequencies of events cannot be influenced by agents.

Abstract:
We characterize games which induce truthful revelation of the players' preferences, either as dominant strategies (straightforward games) or in Nash equilibria. Strategies are statements of individual preferences on R^N. Outcomes are social preferences. Preferences over outcomes are defined by a distance from a bliss point. We prove that g is straightforward if and only if g is locally constant or dictatorial (CD), i.e., coordinate-wise either a constant or a projection map locally for almost all strategy profiles. We also establish that: (i) If a game is straightforward and respects unanimity, then the map g must be continuous. (ii) Straightforwardness is a nowhere dense property. (iii) There exist differentiable straightforward games which are non-dictatorial. (iv) If a social choice rule is Nash implementable, then it is straightforward and locally constant or dictatorial.

Abstract:
Topological social choice is an area which has evolved rapidly in recent years. It involves the use of continuous or topological techniques to study what have come to be known as "Chichilnisky rules." The field has quickly moved from a separate and distinct area of social choice to one which is integrated into the mainstreams of both social choice theory and general equilibrium theory, and which has come to be a bridge between these previously disparate areas. One of the most striking results to emerge is Chichilnisky's result on the equivalence between Arrow's paradox, Chichilnisky's paradox, the existence of a competitive equilibrium in a general equilibrium model and the non-emptiness of the core: Arrow paradox <--> Chichilnisky paradox <--> Competitive equilibrium <--> Core. This shows that social choice is an integral part of the problem in economics and that at a deep level all forms of resource allocation are equivalent. The topological approach to social choice also leads to a set of results on incentive compatibility and manipulability. There is a result equivalent to the Gibbard-Satterthwaite result on manipulability: this result states that any social choice rule which is continuous and respects unanimity must admit a "strategic dictator", someone who has the ability to force whichever outcome he or she most wants, generally be misrepresentation (Chichilnisky, Chichilnisky and Heal, Koshevoy). There is also a very simple characterization of the conditions necessary and sufficient for non-constant manipulability of a continuous social choice rule as those which are locally constant or dictatorial (Chichilnisky and Heal). Finally, one can apply these techniques to the analysis of social choice with infinite populations and show that the rules which are possible in this case are limits of the preferences along sequences of voters which form ultrafilter (Chichilnisky and Heal).

Abstract:
We provide a simple construction of social choice rules for economies with infinite populations. The rules are continuous, Pareto and non-dictatorial; they are constructed as limits of individual preferences when the limit exists, and otherwise as adequate generalizations. This contrasts with the impossibility results of Arrow (1951) and Chichilnisky (1980), which are valid on economies with finitely many individuals. Our social choice rules are, however, limits of dictatorial rules. This paper was written in 1970.