A Value-Added Social Welfare Optimization Problem For Micro-Sustainable Development

Selim, Tarek (2000): A Value-Added Social Welfare Optimization Problem For Micro-Sustainable Development. Published in: Tenth World Congress on Social Economics, University of Cambridge, UK (August 2000)

Abstract

This paper attempts to present a value-added social welfare optimization problem as applied to capital investment projects with environmental amenities. A dynamic model is proposed with the objective of maximizing net social welfare for a desired flow of investment capital, given allowances for uncertainty, risk, sustainability, resource depletion, and social demand constraints. An input-output vector of production is optimized, with the above constraints imposed, and its solution analyzed within the scope of micro-sustainable development. The model’s focal outcome has been that long-run sustainability is a function of cumulative expected short-run system failures, implying that environmental sustainability could be viewed as cumulative disturbances of non-optimal deviations from a long-run social extraction path, the latter taken in both stock and flow-rate terms. Contrary to classical theory, the dynamics of social optimality strictly require social re-investments to generate social capital returns exceeding marginal social cost.

• Item Type: MPRA Paper
• Language: English
• Keywords: social welfare, sustainable development, resource depletion, cost-benefit analysis
• Subjects: D - Microeconomics > D6 - Welfare Economics; H - Public Economics > H4 - Publicly Provided Goods; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q51 - Valuation of Environmental Effects

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