Pollution Control, Economic Adjustment and Long-Run Equilibrium

How do environmental regulations, pollution abatement and technical change interplay over time? How do economic equilibria, the innovation of techniques and adjustment affect each other in the short-run and over the long-term? Answering those questions is the aim of this study. In particular, the substitution of techniques and the implementation of new, less polluting production processes is studied in some detail. For this purpose the analysis combines the Austrian view that production and adjustment is a process in time with a conventional equilibrium framework. However, the focus is not only to provide a theoretical discussion of the intertemporal effects of environmental regulations, technological change, short-run adjustment and long-run development. The theoretical approach is formulated in terms of a computable equilibrium model which is numerically applied to analyze the economic impact of waste water regulations in Western Europe. As such, this study contributes to capital theory, environmental economics and computable equilibrium modelling.