Safe Minimum Standards in Dynamic Resource Problems -- Conditions for Living on the Edge of Risk

Safe Minimum Standards (SMSs) have been advocated as a policy rule for environmental problems where uncertainty about risks and consequences are thought to be profound. This paper explores the rationale for such a policy within a dynamic framework and derives conditions for when SMSs can be summarily dismissed as a policy choice and for when SMSs can be defended as an optimal policy based on standard economic criteria. We have determined that these conditions can be checked with quite limited information about damages and risks. In order to analyze the SMSs in a dynamic setting, we have developed a method for solving optimal control problems where the state space is divided into risky and non-risky subsets.


Issue Date:
2004
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10568
Total Pages:
31
JEL Codes:
C61; Q20; Q30
Series Statement:
Discussion Paper 04-03




 Record created 2017-04-01, last modified 2017-08-23

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