2002 World Congress of Environmental and Resource Economists

There is a relatively small but growing literature in economics that examines conflictive activities using a framework in which agents allocate their resource endowments between wealth production and wealth appropriation. To date, studies in this literature have employed a similar one period game theoretic framework. We propose a methodology to extend this literature to a dynamic setting, and illustrate it by modeling continuous conflict over renewable natural resources between two rival groups. Investigating the system’s steady states and dynamics, we find two results of general interest. First, we find that Hirshleifer’s “paradox of power” is self-correcting, and consequently fails to hold as a steady state outcome. Second, we find that some conflict is good for our economy. That is, if productive activities cause damage to contested resources and to the environment, the introduction of a small amount of conflictive activity enhances social welfare both as the system evolves (system volatility is reduced) and in its steady state (steady state per capita income and renewable resource stock rise).



	Paper Title:	Continuing Conflict
	Presenting Author:	Rafael Reuveny (Indiana University)
	Coauthor 1:	John W Maxwell
	Coauthor 2:
	Coauthor 3:
	Abstract:	There is a relatively small but growing literature in economics that examines conflictive activities using a framework in which agents allocate their resource endowments between wealth production and wealth appropriation. To date, studies in this literature have employed a similar one period game theoretic framework. We propose a methodology to extend this literature to a dynamic setting, and illustrate it by modeling continuous conflict over renewable natural resources between two rival groups. Investigating the system’s steady states and dynamics, we find two results of general interest. First, we find that Hirshleifer’s “paradox of power” is self-correcting, and consequently fails to hold as a steady state outcome. Second, we find that some conflict is good for our economy. That is, if productive activities cause damage to contested resources and to the environment, the introduction of a small amount of conflictive activity enhances social welfare both as the system evolves (system volatility is reduced) and in its steady state (steady state per capita income and renewable resource stock rise).
	Link to paper:	Not available

	Session / Day / Time	2D / Monday / 10:15 - 11:45 am

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