Environmental and Resource Management Under Myopia
SMU Economics and Statistics Working Paper No. 26-2006
36 Pages Posted: 19 Dec 2006
Date Written: December 2006
Myopia is important in environmental and resource management problems because they often involve intertemporal decisions over a long time horizon. We present a parsimonious extension of a standard dynamic programming equation in a continuous time and continuous state setting, which enables rich description of myopic behavior. In our model, the process of planning future controls and choosing current control are clearly distinguished. We illustrate the behavior of various types of myopic agents with a simple example of non-renewable resource extraction, and discuss the policy relevance of the expiry of extraction permits to resource management under myopia.
Keywords: non-constant discounting, resource management, myopia, time-consistency, observational equivalence
JEL Classification: C61, Q30, Q50
Suggested Citation: Suggested Citation