Controlling Stocks and Flows to Promote Quality: The Environment, With Applications to Physical and Human Capital / Nathaniel O. Keohane, Benjamin Van Roy, Richard J. Zeckhauser.

Format:

Book

Author/Creator:

Keohane, Nathaniel O.

Contributor:

National Bureau of Economic Research.

Van Roy, Benjamin.

Zeckhauser, Richard J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7727.

NBER working paper series no. w7727

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Controlling Stocks and Flows to Promote Quality

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2000.

Summary:

Our analysis melds two traditional approaches to promoting quality. The first is restoring the stock of quality. The second is curbing its flow of deterioration. Although both approaches are widely used in real world settings, analytic models have tended to focus on one strategy or the other. We consider a class of problems, which we call SFQ' problems, in which both stocks and flows can be controlled to promote quality. We develop our results in the context of environmental quality, drawing on real-world examples from atomic wastes to zebra mussels. But the lessons are general, and we show how they apply to promoting the quality of both physical and human capital. We first study optimal policies in the limiting cases when only abatement or restoration is possible. We then focus on the full SFQ world, where both approaches can be used. We show that the optimal policy employs both instruments. Moreover, when combined optimally, neither strategy takes the form it would in the absence of the other.

Notes:

Print version record

June 2000.