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Human Well-Being and the Natural Environment$

Partha Dasgupta

Print publication date: 2001

Print ISBN-13: 9780199247882

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0199247889.001.0001

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A.12. Evaluation of Permanent Policy Change

A.12. Evaluation of Permanent Policy Change

Source:
Human Well-Being and the Natural Environment
Publisher:
Oxford University Press

The techniques we have developed can be used for evaluating a permanent policy reform, or a permanent change in some parameter of the economy.35 Consider, for example, a permanent change in a tax rate. Somewhat abusing our notation, let α be the rate. Then (A.23) can be expressed as

H t ( α ) = δ V t ( α ) .
We then have
δ  d V t ( α ) / d α = d H t ( α ) / d α = U C  d C t ( α ) / d α + U L  d L t ( α ) / d α + d I t ( α ) / d α , 
from which we conclude with the eleventh proposition. (p.253)
  1. Proposition 11: The value of the changes in consumption services plus the change in the value of genuine investment occasioned by a permanent change in a parameter of an economy is positive if and only if social well‐being increases.

Notes:

(35) See Johansson and Löfgren (1996) for an original study of this problem for an optimizing economy. Although it reads differently, the social cost–benefit rule they obtained is equivalent to the one presented below as Proposition 11.