Journal of Environmental Economics and Management 40, 236–250 (2000) doi:10.1006/jeem.1999.1121, available online at http://www.idealibrary.com on Renewable Resources and Economic Sustainability: A Dynamic Analysis with Heterogeneous Time Preferences 1 Chuan-Zhong Li 2 Department of Economics, T&S, University of Dalarna, S-781 88 Borl¨ ange, Sweden and Karl-Gustaf L¨ ofgren Department of Economics, University of Umeå, S-901 87 Umeå, Sweden Received March 18, 1997; revised April 28, 1999; published online August 10, 2000 In recent years there has been increasing interest in the study of economic sustainability and its relationship with natural resources. This paper attempts to shed some light on the issue by taking into account the individual variations in time preferences for consumption and resource amenity. We characterize the long-run steady state, analyze its asymptotic stability, and explore the transational dynamics from any initial state. The welfare implications of the optimal path are also discussed. © 2000 Academic Press Key Words: renewable resource; heterogeneous preference; dynamics; sustainability. 1. INTRODUCTION It is today well known that an asymptotically sustained consumption path is, as a rule, not the outcome of a standard present value exhaustible resource prob- lem where utilities are discounted. The key results supporting this argument were derived by Dasgupta and Heal [14], Solow [30], and Stiglitz [31], who showed that the typical consumption pattern is single-peaked with consumption increasing ini- tially and then decreasing after a certain point in time. 3 This implies that the only long-run sustainable utility level being enjoyed by society may well be identical to zero when a positive discount rate is used. Discounting also implies a fundamen- tal asymmetry between present and future generations, particularly those in the very distant future. This is true both for the management of non-renewable and renewable resources. As pointed out by Chichilnisky [10, 11], for any positive dis- count rate, there will always be a dictatorship of the present over the future in 1 This project is partly supported by the National Council for Forestry and Agricultural Research (SJFR). We thank Professors William A. Brock, Peter Berck, and Larry Karp, and the two anonymous referees for valuable comments and suggestions. The usual disclaimer applies. 2 Address correspondence to: Chuan-Zhong Li, Department of Economics, T&S, University of Dalarna, S-781 88 Borl¨ ange, Sweden. 3 Krautkraemer [20] extended these earlier models by taking into account the amenity value of the resource stock. 236 0095-0696/00 $35.00 Copyright © 2000 by Academic Press All rights of reproduction in any form reserved.