L3: Sustainability I Flashcards
Define sustainability (consumers and producers separate) 5: economic 3 ecological 2 political 1
Economic:
i) One in which utility is non-declining over time
(ii) One in which resources are managed to maintain production opportunities for the future
(iii) One in which natural capital stock is non-declining
Ecological
(iv) One in which resources are managed so as to maintain a sustainable yield of resource services
(v) One which satisfies the minimum conditions for ecosystem resilience through time
Political
(vi) One which is the result of consensus building and institutional development
Assumptions of Utilitarian 3
The Social Welfare function is additive
The weights attached are equal
The utility functions are identical
what does Additive function mean?
In an equation, the additive property of equality states that if we add or subtract the same number to both sides of an equation, the sides remain equal. This property holds true for whole numbers as well. For example: Solve for x, x − 3 = 5. Solution. In the equation x − 3 = 5, we solve for x as follows.
What is an iso-elatic utility function?
What two versions are there?
where the elasticity of utility between two individuals is constant.
The Linear and log versions
What does it imply if individuals have the same utility functions? at SW max…
At SW max, individuals have the same consumption
What is the idea behind Rawlsian Theory?
What does it imply?
That people exist behind a ‘veil of ignorance’ with no knowledge about inherited characteristics.
This guarentees fairness and impartiality for the construction of social contracts.
Therefore it implies that whenever utility levels differ between individuals, it is possible to increase SW by redistributing from individuals with higher utility to those with lower utility.
What is the difference principal in Rawlsian theory?
The position on the indifference curve will not change unless the move improves the utilty of individuals and leaves no one worse off. It is pareto efficient.
Deviations are unjust unless all persons benefit (or where the least advantaged benefit).
when there are different levels of utility functions:
A has ___ levels of utility than B for any level of consumption
What assumptions still hold?
Different
Assumptions:
Additive SW function
Equal Weights for consumption-utility
What is the outcome under Different utility functions:
A is more efficient at turning consumption into utility and so wlefare maximisation with equal weights assigns more consumptionto A.
B gets less utility allocated despite equal weight and additive function assumptions.
What does the η represent in the Rawlsian equations?
η = the constant elasticity of marginal utility wrt consumption X
Under the social welfare maximisation extension:
The relative weight for consumption for the worse-off individuals (B) _____ as the degree of inequality increases, and as alpha > ___.
SW depends ___ on X^A as alpha decreases.
The relative weight for consumption for the worse-off individuals (B) increases as the degree of inequality increases, and as alpha > infinity. SW depends less on X^A as alpha decreases.
When we incorporate inequality, the marginal utilities reflect changes in ____. As the elasticity is changed (η) you increase the weights accordingly and utility is ____.
The relative weights accorded to consumption increases for the worst-off person, increases as the degree of ____ between individuals rise, and as η gets bigger
As η goes to infinity, small U increases for the worst-off get weighted much ___ than large U increases for the betteroff. In the limit, increases in U for the better-off have __ _____ on welfare.
When we incorporate inequality, the marginal utilities reflect changes in consumption. As the elasticity is changed (η) you increase the weights accordingly and utility redistributed.
The relative weights accorded to consumption increases for the worst-off person, increases as the degree of inequality between individuals rise, and as η gets bigger
As η goes to infinity, small U increases for the worst-off get weighted much more than large U increases for the betteroff. In the limit, increases in U for the better-off have no effect on welfare.
Intertemporal decision making:
the weights attached to each year’s utility ____ with time at a constant exponential rate.
It assumes: ?? 2
Intertemporal decision making:
the weights attached to each year’s utility, fall with time at a constant exponential rate.
It assumes: population remains constant and single person can represent the whole generation.
