Intergenerational equity: The capital-environment trade-off

This paper examines the trade-off between capital accumulation and environmental quality that determines an intergenerationally equitable program according to the Rawls maximin criterion. This trade-off is explored by an analysis of regular maximin programs in the framework developed by Brock. This results in a constant utility path supported by competitive prices with government imposed effluent charges and environmental rentals. Sufficient conditions for a regular maximin path to satisfy a Hartwick rule in deciding on the combination of capital and environmental quality left to future generations are given.