Control and game models of the greenhouse effect. Economics essays on the comedy and tragedy of the commons (Q1335585)

The title of the book is a good reflexion of its contents. The book tries to capture, in relatively simple models, the mostly qualitative behaviour of the earth in terms of global pollution, natural resources, social welfare, etc. and its (sometimes lack of) control by mankind. It discusses economic policymaking in order to design an efficient mitigation strategy that optimizes overall welfare. The book is very readable, though some background in optimal control (Pontryagin) and dynamic game theory is useful in order to follow the analysis. The central theme is the greenhouse effect, the global warming of our climate. The basic problem here is related to a prisoner's dilemma, or viewed from another angle, to a free rider problem or the ``tragedy of the commons''. Though a global (i.e. Pareto or cooperative) solution is the best, it is not stable from the viewpoint of an individual decisionmaker. Such a decisionmaker may have a myopic logic to pursue his (her) own advantage without considering the total effect. If all decisionmakers would thus behave, a Nash solution results which is worse for all. The author indicates some policies of surtaining the cooperation, i.e. by means of either trigger strategies or renegotiaiton proof strategies. Asymmetric views (a ``cold'' country like Canada might wish a warmer climate as opposed to an already ``warm'' country like India) are also dealt with. In such cases cooperation can be enforced by technology transfer or by the so-called ``issue linkage''. The contents consist of five chapters, some appendices. No index is provided. A glossary of the most used symbols would have been handy also. Chapter one is the ``introduction and conclusions''. It introduces the greenhouse effect, economic policymaking, control theory, game theory and the prisoner's dilemma rephrased in terms of using fossil fuel versus renewables for two countries. Chapter two is a literature review. It introduces and discusses the various aspects of the greenhouse effect such as emissions of carbon dioxide, methane, chlorofluorocarbons and their impact on the earth (rise of mean temperature, rise in sea level, changes in ocean currents,\dots). Environmental resource models are introduced. These models are one-, two- or three-dimensional differential equations, some algebraic equations and a criteria function. The variables involved are pollution, capital, knowledge, fossil energy, consumption and others. In chapter three one-country models of the greenhouse effect are developed and analysed in terms of optimizing the criterion function for which optimal control theory is used. Qualitative (and some quantitative) results of equilibrium solution (as time goes to infinity) are discussed. Chapter four does the same as chapter three except for the fact that more countries, more decisionmakers, are involved. This leads to the introduction of dynamic game theory. Both open-loop and feedback Nash equilibrium solutions are dealt with. One of the (intuitively clear) conclusions is that cooperation leads to a lower level of pollution, but many other, less straightforward, consequences are also discussed. Trigger strategies and renegotiation proof strategies are introduced in order to make the cooperative solution more stable against individual weaknesses of choosing for the myopic Nash solution. Chapter five, lastly, deals with technology transfers and issue linkage which would also make the cooperative solution more robust, but now for countries which enter ``the pollution game'' in a non-symmetrical way. In conclusion, the book is well-written; it was a pleasure to read it. The reader is left a bit puzzled though. The author is honest and modest in admitting that the models on which the results are based are stylized and that the solutions are sensitive to parameter changes and assumptions made. On the other hand, it is quite clear that the greenhouse effect affects all of us. The book is recommended to environmentalists, economists, applied mathematicians and politicians (with some mathematical background).