Knowledge that Transforms

This paper is addressed to the selection of an optimal mix of electricity generating plants. The focus is on the problem of uncertainty with respect to the date of availability of breeder nuclear reactors. Sequential probabilistic linear programming is employed. This makes it possible to optimize the mix of fossil, nuclear, and peaking plants to be installed during the 1980's -- assuming that breeder technology will become available at some randomly determined later date. The model allows for the effects of exhausting our reserves of uranium ore. The exhaustion of these resources does not lead to disaster in the 21st century for an economy or a world with a backstop technology such as coal-fired electricity plants. There seems to be a low value of information on the breeder availability date, for the initial policy is rather insensitive to this date. This conclusion holds not only when future demands are taken as fixed parameters, but also when they are dependent upon the price of electricity. On environmental grounds (climate changes radioactivity hazards, air and water pollution), there may be good reasons to slow the rate of growth of electricity demand. These are quite different issues than exhausting the resources of low-cost uranium ore. If our numerical assumptions are correct, it is not optimal to slow down the electricity growth rate up to 1990 just because of possible delays in the arrival of the breeder and hence a rapid rise in the price of uranium. For the year 2000, the decision on demands can be deferred until the time arrives to make capital investment decisions for the decade following 1990. By that point, some of the breeder's uncertainties will have been resolved.

Proof for a Case where Discounting Advances the Doomsday Get access Tjalling C. Koopmans Tjalling C. Koopmans International Institute for Applied Systems Analysis Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 41, Issue 5, December 1974, Pages 117–120, https://doi.org/10.2307/2296375 Published: 01 December 1974

The proposition that limited natural resources provide a limit to growth and to the sustainable size of population is an old one. The natural resource that was the centre of the discussion in Malthus' day was land; more recently, some concern has been expressed over the limitations imposed by the supplies of oil, or more generally, energy sources, of phosphorus, and of other materials required for production. Those who predicted imminent doom in the nineteenth century were obviously wrong. Were they simply wrong about the immediacy of catastrophe, or did they leave out something fundamental from their calculations? There are at least three economic forces offsetting the limitations imposed by natural resources: technical change, the substitution of man-made factors of production (capital) for natural resources, and returns to scale. This study is an attempt to determine more precisely under what conditions a sustainable level of per capita consumption is feasible, to characterize steady state paths in economies with natural resources, and to describe the optimal growth path of the economy, in particular to derive the optimal rate of extraction and the optimal savings rate in the presence of exhaustible natural resources.

Intergenerational Equity and Exhaustible Resources Get access R. M. Solow R. M. Solow Massachusetts Institute of Technology Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 41, Issue 5, December 1974, Pages 29–45, https://doi.org/10.2307/2296370 Published: 01 December 1974