On the Mitra-Wan forestry model: A unified analysis
We present a substantive and far-reaching generalization of the principal results in the economics of forestry, as formalized by Mitra and Wan (1986). Rather than a polarized dichotomy of linear and strictly concave, differentiable benefit (felicity) functions, we develop the theory in the context of functions that are supported at the golden-rule consumption and are not necessarily concave. Through a non-interiority condition on the set of zeroes of a resulting “discrepancy function,” we show the equivalence of finitely-maximal, maximal, minimal value-loss and optimal programs, and thereby answer questions left open by Brock and Mitra. Our synthesizing criterion is new to the capital theory literature, and in the concave setting, proves to be necessary and sufficient for the asymptotic convergence of good programs.