The name is absent

The constraining influence of F would appear, however, if the production of C_t and
I_t ignored, say, environmental factors. This would not show up in the production in period
t but would constrain production in period (t+l). This is depicted in equations 4 and 5 which
are simple specifications, to facilitate the diagrammatic schema. A more general specification
could be equations 4' and 5':

4^,-     [I_t° > ɪ; I C_t^o = C/] « F,° > f;

5∙.     ∖c_t^o > c; 11; - /,∙] « F_t^o > f;

which indicate that the production of the investment good or consumption good will
increase ⁹-the production of the other remaining the same—if and only if, F, the constraining
factor increases. ¹⁰

Using the more restrictive formulation in equations 4 and 5, Diagram 2 shows the
impact of environmental degradation on period (t+l) production. Determined by f^c and f ',
factor F—see equation 8—constrains production in period (t+l) to J' which lies within GH.
As long as there is environmental degradation in period t, different combinations of f^c and
f ' would constrain production in period (t+l) and comprise a binding constraint such as KL
in period (t+l).

A reduced quadrilateral such as ABCD' results if, for example, in period t, the capital
goods industry causes environmental degradation—f^,' less than f '—with detrimental
consequences on its production in period (t+l).

Diagram 3 illustrates the backward implications of J’ for period t if factor F had not

The increase being referred to would be from a constrained equilibrium in period
(t+l), such as J'— This is explained further in Diagram 2 below.

F_t could be seen to work in a three-pronged manner: (1) a "fixed endowment" of F_t
is determined by f^c and f^, which, in turn, are determined by the previous period’s
environmental policies; (2) a greater availability of F_t+∣ implies that more I_t can be
brought into the production process as a factor of production—thus they are
complimentary; and (3) while L_t and K_t are substitutable in the production of I_t and
C_t, F_t is not.

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