Welfare Measurement of Technological and Environmental Externalities in the Ramsey Growth Model

This paper deals with the measurement of economic welfare within the framework of the Ramsey growth model, when there are anticipated technological and/or environmental changes. It is shown that, under such circumstances, the Hamiltonian along an optimal trajectory underestimates the maximum sustainable utility, meaning that the welfare measure suggested in several recent studies would be incorrect in this case. We also derive the appropriate welfare measure in the presence of technological and environmental changes. The second part of the study concerns the welfare implications of unanticipated technological change.