Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/233757 
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Year of Publication: 
2021
Citation: 
[Journal:] Journal of Public Economic Theory [ISSN:] 1467-9779 [Volume:] 23 [Issue:] 3 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2021 [Pages:] 462-486
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
In this paper I propose a time-consistent method of discounting hyperbolically and apply it to three canonical environmental problems: (i) optimal renewable resource use, (ii) the tragedy of the commons, and (iii) economic growth and pollution. I show that, irrespective of potentially high initial discount rates, time-consistent hyperbolic discounting leads always to a steady state of maximum yield, or, if the environment enters the utility function, a steady state where the Green Golden Rule applies. While (asymptotic) extinction is a real threat under exponential discounting it is impossible under time-consistent hyperbolic discounting. This result is also confirmed for open-access resources. In a model of economic growth and pollution, hyperbolic discounting establishes the Golden Rule of capital accumulation and the modified Green Golden Rule.
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Article
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Published Version

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