Optimal management with potential regime shifts

S. Polasky, A.J. de Zeeuw, F. Wagener

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We analyze how the threat of a potential future regime shift affects optimal management. We use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics, and exogenous versus endogenous probabilities of regime shift. Prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock. We show that all other cases yield unambiguous results. In particular, with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels.
Original languageEnglish
Pages (from-to)229-240
JournalJournal of Environmental Economics and Management
Volume62
Issue number2
Publication statusPublished - 2011

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stock collapse
resource
resource use
economics
Optimal management
Regime shift
Resources
System dynamics

Cite this

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title = "Optimal management with potential regime shifts",
abstract = "We analyze how the threat of a potential future regime shift affects optimal management. We use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics, and exogenous versus endogenous probabilities of regime shift. Prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock. We show that all other cases yield unambiguous results. In particular, with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels.",
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Optimal management with potential regime shifts. / Polasky, S.; de Zeeuw, A.J.; Wagener, F.

In: Journal of Environmental Economics and Management, Vol. 62, No. 2, 2011, p. 229-240.

Research output: Contribution to journalArticleScientificpeer-review

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T1 - Optimal management with potential regime shifts

AU - Polasky, S.

AU - de Zeeuw, A.J.

AU - Wagener, F.

PY - 2011

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N2 - We analyze how the threat of a potential future regime shift affects optimal management. We use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics, and exogenous versus endogenous probabilities of regime shift. Prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock. We show that all other cases yield unambiguous results. In particular, with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels.

AB - We analyze how the threat of a potential future regime shift affects optimal management. We use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics, and exogenous versus endogenous probabilities of regime shift. Prior work in economics has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions on whether the potential for regime shift will increase or decrease intensity of resource use and level of resource stock. We show that all other cases yield unambiguous results. In particular, with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary in the sense of maintaining higher resource stock levels.

M3 - Article

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SP - 229

EP - 240

JO - Journal of Environmental Economics and Management

JF - Journal of Environmental Economics and Management

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