Ambivalent Joint Production and the Natural Environment: An Economic and Thermodynamic Analysis

326 Pages·2000·20.654 MB·English

by  Dr. Stefan Baumgärtner (auth.)

Ambivalent Joint Production
and the Natural Environment
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cootioued 00 page 324
Stefan
Baumgărtner
Alllbivalent
Jo int Production and
the Natural Environtnent
An Economic and Thermodynamic Analysis
With 25 Figures
and 11 Tables
Springer-Verlag Berlin Heidelberg GmbH
Series Editors
Wemer A. Miiller
Martina Bihn
Author
Dr. Stefan Baumgărtner
Department of Economics
University of Heidelberg
Grabengasse 14
69117 Heidelberg
Germany
ISSN 1431-1933
ISBN 978-3-7908-1290-9
Die Deutsche Bibliothek - CIP-Einheitsaufnahme
Baumgiirtner, Stefan: Ambivalent joint production and the natural environment: an economic and
thermodynamic analysis; with Il tables I Stefan Baumgiirtner. - Heidelberg; New York: Physica
VerI., 2000
(Contributions to econom ies)
ISBN 978-3-7908-1290-9 ISBN 978-3-642-57658-4 (eBook)
DOI 10.1007/978-3-642-57658-4
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Preface
This text is the revised version of my doctoral dissertation which has been
accepted by the Department ofEconomics, University ofHeidelberg in June
1999. It is my great pleasure to thank, above all, Malte Faber for encour
aging support of this project. His stimulating ideas acted as a rich source
ofinspiration for me. Till Requate has made extensive comments on earlier
drafts. They have considerably improved the final version.
Parts ofthis work are based on research that I have undertaken together
with Malte Faber, Frank J6st, John L.R. Proops and Johannes Schiller.
Working together with them was a great opportunity, from which I took
a lot of benefit. Thanks to all ofthem for being patient with me.
The different ideas, concepts and models as well as their presentation
within this workhavegreatlygainedfrom comments, critical discussions and
constructive suggestions from many people. Among those whose comments
have left a noticeable impact on this work are Shmuel Amir, Harald Dyck
hoff, ManuelFrondel, StephanHartmann, J6rgHiifner, BerndKlauer, Reiner
Kiimmel, HeinzD. Kurz, AndreasLange, MarkusLehmann, Reiner Manstet
ten, Katalin Martinas, Georg Miiller-Fiirstenberger, Jiirg Niehans, Hans G.
Nutzinger, Charles Perrings, Dan Phaneuf, Armin Schmutzler, Wolfram Un
old, Wolfgang Weidlich and Ulrich Witt. Their contribution is gratefully
acknowledged.
Finally, IamverymuchindebtedtoMarkWenig, MarkEwaldand Martin
Quaasfor theirassistancewithcountlessproblemsofcomputerhardwareand
software.
Heidelberg, December 1999
Stefan Baumgartner
Brief contents
1 Introduction 1
Part I The Phenomenon ofJoint Production
2 Joint production and the natural environment 23
3 Thermodynamics 45
4 All production is joint production 65
Part II The Analysis ofJoint Production in the History of
Economic Thought
5 The classical position and its early critics 94
6 The abandonment ofclassical theory 102
7 Neoclassical theory from partial to general equilibrium
analysis 114
8 The role ofjoint production for the construction of
economic theory 143
Part III The Economics ofAmbivalent Joint Production
9 The concept ofjoint production 157
10 Ambivalence ofjoint products 185
11 Joint products and irreversibility 231
12 Non-convexity ofthe production set 255
13 Ambivalent joint production:
Putting the issues in perspective 290
References 295
Contents
Preface .... v
1 Introduction 1
1.1 The issue under study . . . . . . . . . . . . . . . . . 1
1.1.1 Joint production . . . . . . . . . . . . . . . . 1
1.1.2 Joint products and the natural environment. 2
1.1.3 Ambivalence ofjoint products. . . . . . . . 2
1.1.4 Dynamic economy-environment interactions 3
1.1.5 The state ofknowledge and ignorance 5
1.2 Scope and method ofanalysis. . 6
1.2.1 Defining the basic terms. 6
1.2.2 Scope ofanalysis . . . . . 8
1.2.3 Aim ofthis work . . . . . 8
1.2.4 Environmental Economics and Ecological Economics 9
1.2.5 An interdisciplinary approach. 10
1.2.6 Analytical features 11
1.3 Preview ofthe argument . . . . . . . . 16
I The Phenomenon of Joint Production 21
2 Joint production and the natural environment 23
2.1 The macro-dimension ofjoint production 23
2.2 The cogenerationofelectricity and heat: Ambivalenceofjoint
products . . . . . . . . . . . . . . . . . . . 24
2.3 The impact ofjoint products over time . . . . . . . . . . . .. 30
2.3.1 Flow pollution vs. stock pollution. . . . . . . . . . .. 30
2.3.2 The emission of carbon dioxide, methane and nitrous
oxide: The anthropogenic greenhouse effect . . . . . 32
2.3.3 The emission ofsulfur dioxide: Acid rain 35
2.3.4 The impact ofjoint products over time: Conclusion . 40
2.4 Sulfuric acid: Joint products as the origin ofstructural change 40
2.5 Conclusion 43
3 Thermodynamics 45
3.1 Phenomenological thermodynamics 46
3.1.1 Thermodynamic systems. 46
3.1.2 Conservation ofenergy . 49
3.1.3 Conservation ofmatter . 51
x Contents
3.1.4 Degradation ofenergy . . . . . 51
3.2 Statistical mechanics . . . . . . . . . . 54
3.2.1 Boltzmann's notion ofentropy 54
3.2.2 Phenomenological versus statistical view. 56
3.3 Time-irreversibility................. 59
3.3.1 Reversible time . . . . . . . . . . . . . . . 59
3.3.2 Time-irreversibility in isolated systems: heat death . 59
3.3.3 Time-irreversibility in open systems: complexity
through self-organization 60
3.3.4 Thermodynamics and time-irreversibility 63
3.4 Conclusion 64
4 All production is joint production 65
4.1 The fundamental factors ofproduction. . . . . . . . . . . .. 67
4.2 The thermodynamic view of production . . . . . . . . . . .. 69
4.2.1 Production as a transformation ofenergy and matter. 69
4.2.2 First and Second Law constraints. . . . . . . . . . . 71
4.2.3 A 'toy model' ofindustrial production processes ... 73
4.2.4 Joint production as a consequence ofthe First Law.. 77
4.2.5 Joint production as a consequence ofthe Second Law 78
4.2.6 Some comments on the generality ofthe employed toy
model . . . . . . . . . . . . . . . . . . 80
4.3 Implications and applications ofthe model. . 81
4.3.1 Relationship among the joint outputs 82
4.3.2 Relationship among the inputs . . . . 83
4.3.3 Substitutability vs. complementarity ofinputs. 84
4.3.4 Relationship between inputs and outputs and thermo-
dynamic limits to technical progress 85
4.4 Conclusion 86
II The Analysis of Joint Production in the
History of Economic Thought 89
5 The classical position and its early critics 94
5.1 Adam Smith: The case of joint production requires special
patterns ofexplanation. . . . . . . . . 94
5.2 John Stuart Mill: Demand and supply 98
5.3 Conclusion 100
6 The abandonment ofclassical theory 102
6.1 Johann Heinrich von Thiinen: Ambivalent joint production 102
6.2 Karl Marx: Joint products as waste 104
6.3 WilliamStanley Jevons: Marginal utilityexplainsthe demand
for joint outputs 107
Contents xi
6.4 Conclusion 112
7 Neoclassical theory from partial to general equilibrium
analysis 114
7.1 Alfred Marshall: Substitution in supply . . . . . . . . . . 114
7.2 Heinrich von Stackelberg: Analogies to the case ofsingle pro-
duction 120
7.3 John von Neumann: Duality ofprocess intensities and prices 130
7.4 Arrow/Debreu: The production set . . . 133
7.5 Welfare analysis: Harmful joint outputs 136
7.6 Conclusion 140
Appendix . . . 141
7A Von Neumann's model oflinear production 141
8 The role ofjoint production for the construction of
economic theory 143
8.1 Summary ofchapters 5 to 7 143
8.2 Critical appraisal . . . . . . 146
8.2.1 Empirical relevance. 146
8.2.2 Analytical treatment . 146
8.3 Interpretation......... 147
8.3.1 Two different strategies for the construction of eco-
nomic theory . . . . . . . . . . . . 147
8.3.2 The structuralist research program 150
8.4 Conclusion 153
III The Economics of Ambivalent Joint
Production 155
9 The concept ofjoint production 157
9.1 The notion ofjoint production in the literature . . . . . 158
9.1.1 Joint production in the economic literature . . . 158
9.1.2 Joint production in the business administration
literature .. . . . . . . . . . . 162
9.2 A formal definition ofjoint production 165
9.2.1 Definition............ 165
9.2.2 Properties ofthe definition .. 167
9.3 Subjective elements in the description of production 170
9.3.1 The observer's interest: Is really all production joint
production? . . . . . . . . . . . . . . . . . . . . . . .. 171
9.3.2 The valuation byeconomicagents: Why is the produc-
tion process carried out? . . . . . . . . . . . . . . . .. 175
xii Contents
9.3.3 Conceptual separation between the description ofpro
duction and the valuation ofoutputs by economic
agents. . . . . . . . . . . . . . . . 176
904 Aspects ofjoint production . . . . . . . . 177
904.1 Fixed and flexible joint production 177
904.2 Ambivalent joint production. 181
9.5 Conclusion 184
10 Ambivalence ofjoint products 185
10.1 A model with joint externalities. 187
10.1.1 Specification ofthe model 187
10.1.2 The transformation curve 191
10.1.3 Optimal allocation and shadow prices 195
10.1.4 Ambivalence ofthe intermediate product (I) . 197
10.2 Solution ofthe model 200
10.2.1 Scenario 1: No emissions. . 201
10.2.2 Scenario 2: Final emissions 204
10.2.3 Scenario 3: Joint emissions 208
10.3 Summary ofmodel results . . . . . 213
10.3.1 Optimal 0: . . . . . . . . . • 213
10.3.2 Ambivalence ofthe intermediate product (II) 214
lOA Environmental policy with joint emissions . . . . . . 215
1004.1 Regulation under complete knowledge . . . . 217
1004.2 Incomplete knowledge and learning by doing 217
10.5 Conclusion 219
10.5.1 What determines the value ofjoint outputs? 219
10.5.2 The implication for environmental policy 220
10.5.3 The implication for economic modeling 221
Appendix . . . . . . . . . . . . . . 221
lOA Determining equation for 0: . . 221
lOB Solution for the three scenarios 223
lOB.l Solution in scenario 1 223
lOB.2 Solution in scenario 2 225
lOB.3 Solution in scenario 3 227
11 Joint products and irreversibility 231
11.1 Notions ofirreversibility in production theory 233
11.1.1 Thermodynamic irreversibility .. 233
11.1.2 Koopmans' notion ofirreversibility. . 233
11.1.3 Debreu's notion ofirreversibility . . . 234
11.1.4 Dated goods vs. complete representations 238
11.2 Production and capital accumulation . . . . . . . 240
11.2.1 Reversible capital theory. . . . . . . . . . 241
11.2.2 Joint products and irreversible capital accumulation 248