ABSTRACT
Cheviakov and Hartwick (2007) probed the Asheim et al., (2007) version of the Solow model to see what effect depreciation of capital would have. Given so-called radioactive decay of capital, economic collapse turns out to be inevitable. Cheviakov and Hartwick then included exogenous technical change to offset the decay in produced capital and found that sufficient technical change can indeed restore sustainability. (This analysis is related to but different from that in Stiglitz (1974).)
A technical digression: The basic Solow model, which solves maximization of the stream of future consumption for a society, results in produced capital (K) increasing linearly with time while investment each period remains constant. In Asheim et al. (2007), aggregate saving and investment are linear in current output, but produced capital increases quasi-arithmetically. The Cobb-Douglas assumption on technology keeps the solution from getting too technically daunting.7 The Cheviakov-Hartwick extension solves by less direct arguments and involves a messier produced capital growth function.8 Stollery (1998) was able to exploit the linear-in-time form of growth in produced capital in his extension of the basic Solow model to incorporate global warming arising from oil extraction. Let us now turn to some analysis of global warming, with the basic Solow model at its core.
