Some models for the economic evaluation of the environment

Abstract

The paper deals with the formalization and measurement of environmental preferences. The continuing rise of the national product in industrialized countries appears increasingly to affect the physical environment, leading to questions as to whether the achievement of steady growth in the national product should be the only aim of economic policy. Preferences for the maintenance of the quality of the environment appear to command more weight, but this is generally overlooked in theoretical economic analysis.

In the paper a model-theoretical framework of a static situation is first presented dealing with an evaluation of the static allocation of scarce resources between environmental expenditures and all other expenditures. Some experiments with the allocation of expenditures for maintaining and improving the physical infrastructure are carried out.

Secondly, a more mathematical and rather abstract approach is presented as a transition to the final part of the paper.

In this, the approach to environmental priorities is placed in a dynamic context dealing with a continuous management of physical environment. Techniques of optimal control are applied in order to solve these dynamic programs.