A Static General Equilibrium Analysis of an M-P Chain

Although it is often stated that resource extraction and environmental pollution are related via material flows through the economy, most studies in environmental economics do not treat this relationship explicitly. Of course, it could be argued that in the short run extraction and pollution can be treated separately. However, over a longer period of time the relationship between the two is extremely important. This is also recognized in the literature on economic growth and the environment, environmental sustainability, the de-linking of income and environmental pressure (the environmental Kuznets curve debate), and dematerialization and industrial metabolism (e.g. Ayres, 1989; Herman et al.,1989; Selden and Song, 1994; Ayres and Ayres, 1996; De Bruyn et al., 1997).