In this book, Professor Uzawa modifies and extends the theoretical premises of orthodox economic theory to those broad enough to be capable of analyzing the phenomena related to environmental disequilibrium, particularly global warming, and of finding institutional arrangements and policy measures that may bring about a more optimal state where natural and institutional components are harmoniously blended. He constructs a theoretical framework in which three major problems concerning global environmental issues may effectively be addressed. First, all phenomena involved with global environmental issues exhibit externalities of one kind or another. Secondly, global environmental issues involve international and intergenerational equity and justice. Thirdly, global environmental issues concern the management of the atmosphere, the oceans, water, soil, and other natural resources that have to be decided by a consensus of all affected countries.

‘The brilliant economic theorist, Hirofumi Uzawa, has shown in this book the usefulness of sophisticated economic theory in the analysis of the very important and very practical problem of global climate change. He has studied such varied concepts as the optimal levels of tradeable permits and carbon taxes for the optimization of economic activity when account is taken of the effects of climate change. He has gone further to study the dynamic paths that have to be taken to best distribute the costs and gains between the present and the future as well as across countries. Finally, he has contributed a very original analysis of the process of bargaining about climate change among different countries. The book is a remarkable combination of close understanding of the climatic problem and original development of new and appropriate economic theory.’

Kenneth Arrow - Stanford University

‘This is a far-reaching work on the foundations of the economics for global public goods. The clarity of exposition, the depth and breadth of reach, allied to the sheer elegance of the analysis undertaken in it by Professor Uzawa, are what we have come to expect from one of the noblest and most acute social scientists of our time.’

Sir Partha Dasgupta - University of Cambridge

‘This long-awaited book by one of the leading economic theorists of the last century sheds new light on one of the most significant and least tractable environmental problems of our times, climate change. Not every feature of the problem is addressed, but what is covered is vintage Uzawa. The deferential (Nash) equilibrium and the core of the cooperative game between major sources of greenhouse gases are characterized with a rigour that many will find deeply satisfying. Not for the first time, an initiative by the Royal Swedish Academy of Science’s Beijer Institute has strengthened the foundations of environmental economics everywhere.’

Charles Perrings - University of York

‘Global climate change presents important challenges and interesting problems for economic theory and empirical policy analysis, because of climate change’s massive scale, long time horizon, and fundamental uncertainty. There is no one better equipped to write a book on the relationship between economic theory and global warming than Hirofumi Uzawa, the distinguished theorist from the University of Tokyo. This book will advance discussions among economists and become a standard reference for the profession.’

Robert Stavins - Harvard University