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From the Linear Economy to the Circular Economy: A Basic Model

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This paper sets up a Ramsey model with natural resources to study the optimal recycling of polluting raw materials. Under plausible conditions it is optimal for the economy to go through an initial linear phase with no recycling followed by a circular phase where a fraction of materials is recycled to alleviate growing natural resource scarcity and environmental degradation. In the presence of a Pigouvian tax on nonrecycled materials a competitive market economy will ensure the optimal degree of recycling.
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Keywords: CIRCULAR ECONOMY; HOTELLING RULE; LINEAR ECONOMY; OPTIMAL RECYCLING; PIGOUVIAN TAXATION

Document Type: Research Article

Publication date: 01 March 2018

This article was made available online on 12 December 2017 as a Fast Track article with title: "From the Linear Economy to the Circular Economy: A Basic Model".

More about this publication?
  • As one of the world's oldest professional journals in public finance, founded in 1884, FinanzArchiv (FA) publishes original work from all fields of public economics which are of interest to an international readership, e.g. taxation, public debt, public goods, public choice, federalism, market failure, social policy, and the welfare state. Special emphasis is on high-quality theoretical and empirical papers on current policy issues.

    FA is a peer-reviewed journal commited to a prompt turnaround of submissions.

    FA is listed in the Social Science Citation Index (SSCI), in Current Contents/Social and Behavioral Sciences, in Econ Lit, in the Journal of Economic Literature, in IDEAS and RePEc and in the International Bibliography of the Social Sciences.

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