Abstract

We model long-run economic development through technology adoption under scientific uncertainty about environmental effects. There are four possible long-run equilibria in a socially planned economy: ‘High-growth’, adopt rapidly, but abandon damaging technologies once revealed (DDT, CFCs); ‘Cautious’, brake the introduction of new technologies to avoid mistakes (genetically modified organisms); ‘No-growth’, halt technological progress to preserve secondary knowledge; and ‘Collapse’, adopt rapidly without ever abandoning damaging technologies. In the base parameterization a short-sighted social planner chooses the cautious strategy. A far-sighted planner chooses the high-growth strategy, unless damages are irreversible in which case the cautious strategy again dominates. Regulatory options in the market economy are investigated. Pollution taxes do not affect the firm’s level of precaution if they can only be applied after the adopting firm has reaped the benefits; however, they do encourage the abandonment of damaging technologies. Liability rules do affect precaution, but may lead to excessive caution, or even a no-growth trap

Keywords

Technology adoption - Lock-in - Learning-by-doing - Uncertainty - Environment

Published in

Environmental and Resource Economics
2008, Volume: 42, number: 4, pages: 429-450

SLU Authors

• Hart, Robert

  • Department of Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Social Sciences
Economics and Business


Publication identifier

DOI: https://doi.org/10.1007/s10640-008-9216-x

Permanent link to this page (URI)

https://res.slu.se/id/publ/26249