Economic Growth

Résumé du livre

The goal of Chapters 3 and 4 is to offer an economic analysis on the greenhouse effect. Chapter 3 presents a two-sector dynamic model in which the productivity of the agriculture sector depends on weather temperature which in turn is affected by the production activities of the manufacture sector. Competitive equilibria in this model are analysed. Conditions under which the world economy and the global average temperature display a cyclical or chaotic time path are explored. The chapter concludes that the dynamic interaction between a stable natural system and a self-stabilizing market mechanism can, under certain conditions, lead to cyclical or even chaotic behavior. Using a two-country version of the model developed in Chapter 3, Chapter 4 shows that the optimal time path of outputs and temperature will converge to a unique steady state provided that consumers care enough about the future. The equilibrium outcome of a bargaining game where two countries negotiate an agreement on future consumption and production plans for the purpose of combating global warming is derived. It is shown that the agreement between the two countries can be implemented in decentralized economies by a system of taxes and transfers.