sustainability policy and environmental policy a theoretical representative agent economy with a depletable resource stock polluting emissions and productive capital is used to contrast environmental policy which internalises externalised environmental values with sustainability policy which achieves some form of intergenerational equity the obvious environmental policy comprises an emissions tax and a resource stock subsidy each equal to the respective external cost or benefit sustainability policy comprises an incentive affecting the choice between consumption and investment and can be a consumption tax capital subsidy or investment subsidy or a combination thereof environmental policy can reduce the strength of the sustainability policy needed more specialised results are derived in a small open economy with no environmental effects on utility

nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

invariance in growth theory and sustainable development abstract this paper analyzes the general concept of sustainability from a different point of view than that generally found in the literature if sustainability is defined as the requirement to keep something constant or at least non decreasing throughout time the choice of the thing to be preserved is controversial neo classical models mainly assume that sustainability requires that consumption or a utility level has to be preserved in this paper we object to this a priori conception of sustainability and define all the quantities that can be preserved in neo classical optimal growth models we thus wonder if invariant quantities can be found along the optimal paths defined by a classical representation of an economy with an exhaustible resource we use the noether theorem to determine the conservation laws of dynamic systems we examine under which conditions there is such invariance and how it could be interpreted as a sustainability indicator we emphasize the limits of the economic growth theory for coping with the sustainability issue

living in an uncertain world environment substitution local and global indeterminacy abstract environmental problems are increasingly frequent intensive and unpredictable to protect from the observed environmental depletion economic agents increasingly react by substituting previously free public environmental goods with costly private goods this substitution mechanism however can contribute to enhance the indeterminacy of the possible consequences of mankind activity further increasing the uncertainty on the future environmental trajectories to investigate this issue the paper proposes an intertemporal optimization problem in which agents derive utility from three goods leisure a public environmental good and or private consumption that can be used as a substitute for the environment the analysis shows that the economy may end up being trapped in the pareto dominated steady state and that both local and global indeterminacy may arise in the model no indeterminacy however emerges if green technologies are used so that production has no negative effects on the environment

the sustainable borders of the state economic crises have historically set the stage for the reconfiguration of the economic borders of the state current concerns focus on debt and associated intergenerational issues such as pensions infrastructure and the environment the sustainable state is designed to put in place a framework for integrating these intergenerational issues alongside the traditional focus on macroeconomic policy static market failures and transfers the building blocks include the accounting framework and in particular a national balance sheet setting out assets and liabilities and providing for capital maintenance over time to support these assets and to provide for sufficient investment the sustainable state requires an appropriate level of savings and institutions to translate these savings into investments two components are the deployment of regulatory asset bases to underpin long term sunk and fixed costs given the time inconsistency problem in government s commitments and the development of financial intermediaries such as an infrastructure bank copyright 2011 oxford university press

degradation of environmental capital and national accounting procedures abstract the capital theoretic approach to the environment as a wastable stock a stock with a flow of abatement services is explored in a simple ricardo like model involving wheat production and pollution production as an essential by product we then turn to how the national accounts are implicit in growth or capital theory models and how formulae emerge for accounting for the wasting of environmental capital airsheds and watersheds from excessive use

beyond the bounded instrumentality in current corporate sustainability research toward an inclusive notion of profitability we argue that the majority of the current approaches in research on corporate sustainability are inconsistent with the notion of sustainable development by defining the notion of instrumentality in the context of corporate sustainability through three conceptual principles we show that current approaches are rooted in a bounded notion of instrumentality which establishes a systematic a priori predominance of economic organizational outcomes over environmental and social aspects we propose an inclusive notion of profitability that reflects the return on all forms of environmental social and economic capital used by a firm this inclusive notion of corporate profitability helps to redefine corporate profitability as if sustainability matters in that it overcomes the bounded instrumentality that impairs current research on corporate sustainability we apply this notion to different car manufacturers and develop conceptual implications for future research on corporate sustainability

optimal tax rules and public sector efficiency with an externality in an overlapping generations model abstract this paper examines optimal tax rules and public sector efficiency integrating them in a second best world with pollution by using an overlapping generations model the second best world is characterized by the comparative statics of green preferences the main results obtained are as follows first the marginal cost of public funds may be reduced by the externalities regardless of the choice of taxes second optimal environmental and non environmental tax rules are additively and directly affected by the dynamic efficiency of capital accumulation per unit labour decal and indirectly by it through the efficiency of the public sector environmental taxes going beyond pigovian ones may be welfare improving if the decal is improved by the environmental tax even optimal non environmental tax rules should additively and directly counter the dynamics of pollution to consider the income effects of the optimal tax system for the future third the additivity property or the principle of targeting does not hold even in the absence of incentive compatibility constraints the essential reasons for this are clarified as follows distortions that should be countered by taxes that is the income effects of the optimal tax system and the decal in this model break the equality between optimal environmental taxes and the externalities measured by governments finally growing environmental concerns may in fact increase pollution the inverse relationship between environmental and labour income taxes may not hold

constant consumption and the economic depreciation of natural capital the nonautonomous case we investigate economic depreciation of natural capital for cases of nonstationary output prices technology and interest rates for the former two cases exogenous movements in prices and technology constant consumption emerges under a strategy of investing to cover off economic depreciation the interest rate case requires a modified sinking fund strategy

managing cattle grazing under degraded forests an optimal control approach abstract in this paper aspects of knowledge generation and administration concerning management of a rural enterprise in the argentine chaco region are analyzed the deterioration of natural resources and human living conditions show that forest cattle interaction and the ecological economics of the system are poorly understood or not properly taken into account a methodological solution to a typical decision making problem is proposed here and illustrated by a worked example extracted from a real feasibility study the introduction provides a summary of the natural history and of the human interventions in the region arguments on the roke of silvopastoral systems in reverting forest and soil degradation into sustainable productive undertakings are also exposed the mathematical treatment of the problem follows a system theoretic approach a basic nonlinear model for the dynamics is designed first its simplest version includes three state variables livestock units forest biomass and forage availability and two manipulated variables percentage of female calves sold each year and percentage of the cows that did not give birth during the past period and went for sale states and controls are related by coupled differential difference equations selected results from simulation are shown foundations are also laid for taking into account impulsional controls selective and massive wood extractions forage implantation cattle additions and sales the objective function reflects sustainable development principles it evaluates the process in terms of usual economics and introduces ecological components of the management strategy the total cost is expressed as the accumulation of net expenses made for a fixed number of years minus the sale value of the firm at the end then a dynamic programming scheme is developed for finding optimal trajectories with respect to the basic setup shadow prices for the states are derived from the solution progress towards the building of a decision support system with the preceding elements is reported

second order sustainability conditions for the development of sustainable innovations in a dynamic environment abstract in particular radical innovations can be important means to achieving improved sustainability due to the existence of path dependency and lock in however the transition from one technological trajectory to another more sustainable one is often impeded by significant barriers fortunately these barriers are by their nature subject to substantial changes in time so it makes sense to carefully distinguish between periods of stability showing high barriers in which the given trajectory can hardly be left and periods of instability characterized by low barriers where a new trajectory can be reached more easily the latter distinction matters since sustainable innovations often rely on governmental regulation and the economic burden arising from this regulation will be much lower in periods of instability moreover due to the complexity and dynamics of change in their respective environments innovations are generally associated with fundamental uncertainty such that it becomes impossible to predict the degree of sustainability yielded by specific innovations in the longer run under these circumstances it is essential to facilitate the change between trajectories and to allow for the possibility to select between a variety of alternative trajectories within a process of trial and error sustainability as viewed from this evolutionary perspective is therefore better understood as the general capability to adapt that is to readily change from less to more sustainable technological trajectories since the latter kind of sustainability determines the conditions under which the former kind i e sustainability related to a specific technology can be achieved the two kinds are respectively called second order and first order sustainability finally a series of determinants and corresponding indicators from the techno economic political and socio cultural sphere is identified which after proper measurement and weighting allow for making an assessment whether and when the incumbent industry is sufficiently destabilized and the political system rendered sufficiently favorable to the new more sustainable technology such that a transition to the preferred trajectory is possible without too much effort

linking economic and ecological models for a marine ecosystem increasingly economists and ecologists have begun to recognize the value to public policy of combining information and results from each discipline into multidisciplinary studies here we present a methodological approach that links economic and ecological analyses we develop an economic ecological model by merging an input output model of a coastal economy with a model of a marine food web we describe distinct linear system sub models of the economy and the ecosystem and we develop a method for linking the two our method extends the work of earlier researchers by incorporating an ecosystem matrix into resource multipliers and by showing how these multipliers may be calculated we present a numerical example for the new england region using coastal economic and marine ecological data from the region for a restricted set of industry sectors and food web trophic levels we calculate resource multipliers for the example and we simulate the economic impacts of changes in primary production in the ecosystem on final demands for fishery products the results illustrate the effects of incorporating the impacts of habitat destruction and ecosystem structure on resource multipliers our approach can be extended to incorporate the full range of sectors in the economy and trophic levels in a linked ecosystem 2003 elsevier b v all rights reserved

economics and sustainability balancing trade offs and imperatives the concept of sustainability has been increasingly invoked in scholarly and public policy debates discussion has been hampered however by uncertainty and lack of uniformity in the meaning of sustainability this paper seeks to identify some common ground among economists ecologists and environmen tal ethicists two issues seem salient require ments for intergenerational and the defi nition of social capital to be provided to future generations a concept of safe minimum standard which has received at least some recognition in the ecology philosophy and eco nomics literatures may provide the beginnings of a common ground for debate about sus tainability jel q2

flows of air pollution ill health and welfare we provide a theoretical framework for measuring welfare when pollution influences economic growth by impairing health and driving up defensive medical expenditures we demonstrate the usefulness of our framework in practice by applying it to data from swedish valuation studies designed according to the accounting principles suggested here we estimate that the negative health effects of nitrogen dioxide emissions amount to 0 6 of gdp in sweden we also show that a corrective pigouvian tax should internalize the direct disutility reduced labor productivity and increased healthcare expenditures caused by pollution according to our calculations harmful health impacts alone excluding ecosystem effects justify 65 of the current swedish tax on nitrogen dioxide

accounting for the value of ecosystem services abstract a value of ecosystem services ves may be calculated by multiplying a set of ecosystem services by a set of corresponding shadow prices this paper examines the role of the ves concept in measuring trends in human well being under conventional arguments from applied welfare economics standard measures of market consumption may be extended to include the value of direct environmental services which affect welfare in ways that are not mediated by the consumption of purchased goods the ves concept does not capture values such as ecological sustainability and distributional fairness that are not reducible to individual welfare and its operationalization is constrained by the well known limitations of nonmarket valuation methods nonetheless attempts to calculate the value of environmental services can provide insights into the tradeoffs between market activity and environmental quality that are implicit in the process of economic growth such efforts can promote informed debate concerning the achievement of sustainable development

racial differences in the employment policy of state and local governments the case of male workers although increased political participation of minorities has been an important aspect of the civil rights movement few studies have examined the effect of race based political participation on employment discrimination a number of studies provide evidence that minorities earn significantly less than comparably skilled whites in the federal government and that less wage discrimination exists in the federal sector 3 11 15 borjas argues and provides empirical support that this results from a vote maximizing government that uses its hiring decisions to mollify an electorate with a taste for discrimination 6 7 while borjas provides a valuable framework to analyze government employment policy he overlooks the interaction between public and private sector hiring decisions and excludes state and local government employees slgs that account for four fifths of public sector employment in this paper i extend the analysis by not only incorporating state and local government but also by modeling public and private sector interactions rather than adopting a taste for discrimination to explain racial patterns in public wages and employment i develop a public choice model where racial constituencies compete for economic rents from the provision of local public goods estimates of the black white wage differential for male workers in each state are found to be consistently smaller for state and local government than the private sector i show that this finding is consistent with the hypothesis of a vote maximizing government responding to the political clout of rent seeking racial interest groups in particular this paper provides the first evidence that racial groups may raise their relative wage in the public sector by increasing their voter participation relative to other racial groups i also argue that the apparent joint effect of segregation and relative political participation on the relative wage distinguishes the hypothesis of competition for local public goods from its alternatives in addition the incorporation of a publicprivate sector interaction suggests that the private sector wage differentials are not simply passed forward to the public sector in the theoretical model i hypothesize that two racial interest groups black and white compete for government employment as a means of determining the allocation of local public goods

optimal dutch disease growth models of the dutch disease such as those of krugman 1987 matsuyama 1992 sachs and warner 1995 and gylfason et al 1999 explain why resource abundance may reduce growth however the literature also raises a new question if the use of resource wealth hurts productivity growth how should such wealth be optimally managed this question forms the topic of the present paper in which we extend the growth literature on the dutch disease from a positive to a normative setting we show that the assumptions in the previous literature imply that the optimal share of national wealth consumed in each period needs to be adjusted down however some dutch disease is always optimal thus lower growth in resource abundant countries may not be a problem in itself but may be part of an optimal growth path the optimal spending path of the resource wealth may be increasing or decreasing over time and we discuss why this is the case

the net national product and exhaustible resources the effects of foreign trade abstract it is the widely held view that estimates of national income should be corrected for the value of the extracted exhaustible resource stock this correction implies the counter intuitive result that the national income of an oil producer is unaffected by its vast oil reserves in this paper we review the definition of national income and discuss its relation to national welfare we show that an extra income should be imputed to the resource owning country based on the exportable resource stock part of the net adjustment for resource use is made to the income of the resource using and not the resource producing country

on the intergenerational allocation of natural resources it is known hartwick and others that under standard assumptions a society that invests in reproducible capital the competitive rents on its current extraction of exhaustible resources will enjoy a consumption stream constant in time it is shown here that this result can be interpreted as saying that an appropriately defined stock of capital including the initial endowment of resources is being maintained intact and that consumption can be interpreted as the interest on that patrimony this seems like a useful rule of thumb for policy

a mixed bentham rawls criterion for intergenerational equity theory and implications abstract this paper proposes a welfare criterion that balances the need for development and the concern for the least advantaged generations and explores its implications this criterion called the mixed bentham rawls criterion moderates the effect of discounting yet permits some degree of intertemporal trade off it is a weighted average of two terms a the sum of discounted utilities and b the utility level of the least advantaged generation we derive necessary conditions to characterize growth paths that satisfy our criterion and show that in some models with familiar dynamic specifications an optimal path exists and displays appealing characteristics

intertemporal equity and efficient allocation of resources abstract competitive paths which are efficient are shown to satisfy a terminal cost minimization condition thereby providing a continuous time counterpart to the discrete time result due to malinvaud using this result competitive paths which are equitable and efficient are shown to satisfy hartwick s investment rule which states that the value of net investment is zero at each date our result indicates that hartwick s rule can help to signal inefficiency of competitive equitable paths journal of economic literature classification numbers c61 d90 o41

bibliography of robert m solow s publications 1950 1987 1952 6 an econometric model of interindustry flows with k j arrow and r shephard abstract econometrica july 1952 7 on the structure of linear models econometrica january 1952 8 review of w e deming some theory of sampling review of econometrics and statistics may 1952 9 review of r dorfman application of linear programming to the theory of the firm journal of american statistical association june 1952 10 review of t c koopmans ed activity analysis of production and allocation journal of american statistical association june 1952 11 review of r roy ed cahiers dii seminaire deconometrie no 1 journal of american statisticalassociation december 1952

environmental issues and economic decisions in developing countries abstract this paper explains the key role of environmental economics in incorporating environmental concerns into decision making and in facilitating the more efficient management of natural resources as a step toward sustainable development it reviews concepts and techniques for valuation of environmental impacts for use in conventional cost benefits analysis as well as key related aspects including environmental impacts of economywide policies multicriteria analysis risk and uncertainty and discount rate issues several developing country case studies are summarized which cover a range of practical valuation methods the evidence presented suggests that the valuation techniques for determining use values may be applied successfully in appropriate cases but examples involving nonuse values are rare the use of multiobjective desicion methods also needs to be explored where economic valuation is not feasible

the dutch disease and intergenerational welfare governments in resource abundant economies face a tradeoff between transferring wealth to present generations and saving for future generations employing an overlapping generations framework with endogenous growth this article analyses the intergenerational welfare effects of 1 a wealth transfer policy where the entire wealth is transferred to the generations alive at present 2 an income transfer policy where the wealth is saved and the permanent income of the wealth is transferred to all present and future generations forever not surprisingly present generations are unambiguously better off with the wealth transfer policy less trivially however the wealth transfer policy can be associated with higher welfare also for future generations the intuition for this result is that while a wealth transfer depresses growth only in the periods subsequent to the transfer income transfers constitute a permanent drag on growth perhaps counter to the naive intuition the policy of saving the wealth and

international trade and the sustainability footprint a practical criterion for its assessment a simple and minimal criterion for sustainability is that the value of natural capital plus manufactured capital be not decreasing on the basis of any individual country or region the above simple comparison may be misleading as it does not take account of the production of goods for consumption in other countries regions via international trade in other terms the full environmental footprint of a country may not be properly assessed a method of calculating a weak sustainability criterion has been established for both a closed economy approach and an open economy approach there are significant differences between the open and closed economies measures for several regions particularly the middle east overall global sustainability on this criterion has been positive and increasing using a difference equation approach a further analysis has been made of the average proportional rate of change of global sustainability between 1980 and 1990 and its various regional and structural components have been determined these indicate that most of global sustainability growth can be attributed to western europe other asia and japan particularly through high savings ratios the usa on the other hand has made a very small net contribution to the growth in global sustainability

discounting of long term costs what would future generations prefer us to do decisions with intergenerational consequences may leave future generations worse off i e not be pareto optimal if costs and benefits are not discounted correctly we point out that this happens if the conventional social discount rate is applied to intergenerational costs with that rate the justification of intergenerational costs benefits of a project are invested and the proceeds can cover future costs leads to an inconsistency over the long term eventually the supposed benefits of any project become larger than the entire gnp the conventional approach commits an error by treating the time preference component of the discount rate as if it represented creation of wealth while it really involves only redistribution the time horizon of the redistribution is limited by the duration of market transactions especially loans thus we recommend a two step discounting procedure with the conventional social discount rate for the short term about 30 years and the growth rate of the economy for the long term data for gnp per capita growth in the us the uk france germany japan and the soviet union since the industrial revolution combined with data for net economic welfare per capita suggest an intergenerational discount rate in the range of 1 to 2 for practical application the rate at which costs and benefits will grow over time is just as important as the discount rate only the difference between these two rates matters for many environmental costs these rates may be close to each other during the next few generations this implies that some of the uncertainty in the prediction of rates cancels and one can treat the problem as if the effective rate were close to zero the consequence for costs such as global warming or nuclear power can be very significant the valuation can increase by more than an order of magnitude compared to values based on conventional discounting

measuring the depreciation of australia s non renewable resources a cautionary tale abstract the pursuit of sustainability is widely seen as requiring the calculation and publication of environmentally adjusted measures of national income and or of economic indicators intended to show whether or not economic behaviour is consistent with sustainability requirements in either case a measure of natural resource depreciation is needed the paper restricts its attention to non renewable mineral resources and measures their depreciation in australia according to different methods proposed in the literature using data published by the australian bureau of statistics the different methods are found to yield strikingly different results the conclusion is that robust measurement of natural resource depreciation is unlikely and that results appertaining to such should be treated sceptically

assessing sustainability a comprehensive wealth accounting prospect an application to mozambique we estimate the wealth of mozambique in 2000 and 2005 in order to assess the sustainability of its development path our methodology builds on arrow et al 2010 we show that mozambican wealth increases through human and physical capital accumulation while the pressure on natural capital remains low the growth of total factor productivity enhances the outcome of the different capital assets but population growth has a strong downward effect on wealth per capita results suggest that mozambican development was sustainable between 2000 and 2005 but these remain ambiguous and are highly sensitive to data and assumptions used

the sustainable residential water use sustainability efficiency and social equity the european experience abstract the present paper traces the operational conditions governing the sustainable use of water in cities towards this objective the paper first proposes a new comprehensive definition for the sustainable use of water next efficiency in use is proposed as a fundamental instrument in achieving sustainability in spite of prevailing opinions maintaining that sustainability and efficiency aim at different and probably conflicting objectives in this light several pricing modes that inhibit efficiency are examined and their effects are defined in this context egalitarian pricing which nevertheless prevents efficiency is also systematically evaluated until it is ascertained that it does not serve social equity in the use of water in the long run all the more the present paper advocates that certain egalitarian pricing systems such as the increasing block rates most prevalent at this time may have the reverse effect than the one intended and hence in the long run impose negative impacts on the welfare of low incomes as a result full cost prices are proposed as a necessary instrument for the sustainable use of water an instrument that promotes social equity in the long run the assumptions of the study are examined in a comparative analysis of representative european pricing systems and urban management modes

human development and economic sustainability abstract this paper attempts to integrate the concern for human development in the present with that in the future in arguing for sustainable human development it appeals to the notion of ethical universalism an elementary demand for impartiality of claims applied within and between generations economic sustainability is often seen as a matter of intergenerational equity but the specification of what is to be sustained is not always straightforward the addendum explores the relationship between distributional equity sustainable development optimal growth and pure time preference

is aging harmful to the environment how does aging affect the environment we analyze this question using anoverlapping generations model featuring uncertain lifetimes andenvironmental externalities we show that whether aging is harmful to theenvironment depends on the curvature of utility function which ismeasured by the degree of relative risk aversion we also explore theimplication of the results for environmental policy in an aging society

genuine savings and sustainability genuine savings gs has emerged as the leading economic indicator of sustainable economic development at the country level it derives from the literatures on weak sustainability wealth accounting and national income accounting we discuss the theoretical underpinnings of gs focusing on the relationship between changes in a nation s extended capital stock and the future path of consumption the indicator has entered widespread use propelled by the world bank s publications despite its varying performance as a predictor for future consumption notwithstanding the extensive body of literature reviewed promising future research avenues are identified

net national product as an indicator of sustainability net national product nnp can potentially serve several objectives among others to measure value added and to be an indicator of welfare in the aftermath of the world commission on environment and development however it also seems important to investigate whether the concept of nnp can serve as an indicator of sustainability my point of departure following hicks 1946 ch 14 is therefore to require that nnp should measure what can be consumed in the present period without reducing future consumption possibilities and in line with this to argue that the nnp should equal the maximum per capita consumption level that can be sustained if sufficiently many facilitating assumptions are made then a concept of nnp that serves as an exact indicator of sustainability can easily be constructed for instance for a closed economy with a constant population a stationary technology and with only one capital good it follows that the present does not reduce future consumption possibilities if and only if it does not decrease the stock of the single capital good hence under the assumption that the one capital good k is identical to the one consumption good x nnp defined as y x k measures the maximal sustainable consumption at time t because then x y is equivalent to k the purpose of this note is to establish that with multiple capital goods it is not in general possible to construct an exact indicator of sustainability on the

scarcity resource price uncertainty and economic growth over the course of the past decade significant steps have been taken to empirically link indicators of resource scarcity to changes in economic growth this paper extends this previous literature in two ways first rather than concentrating exclusively on energy we focus on the technological change embodied in the prices of an array of complementary natural resource inputs second we investigate using g arch methods the importance of resource price uncertainty as well as resource price levels on aggregate economic growth we find that output growth is significantly influenced by both resource price levels and resource price uncertainty

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

sustainable farm income in the presence of soil erosion an agricultural hartwick rule soil erosion is a physical and economic problem of natural capital degradation even along an intertemporally efficient trajectory one can have in a loss of soil fertility and a continuous decline of agricultural net revenue moreover soil erosion is a major source of surface water pollution in rural areas erosion control is thus a challenge for sustainable resource management and internalizing external effects to sustain the level of farm income an agricultural hartwick rule is proposed which addresses both on farm and off farm effects of soil erosion first it requires the investment of the soil rents into alternative capital second additional measures are required to comply with an ambient quality target a charge subsidy scheme proves the most adequate from a perspective of cost effectiveness and sustainability if effluent charge revenues are earmarked to subsidize cropland retirement at the watershed scale in combination with the investment of soil rents this enables to maintain the level of farm income constant over time while respecting the ambient quality target altogether this fulfills the requirements of efficiency and sustainability 2003 elsevier science b v all rights reserved

capital theory and the measurement of sustainable development an indicator of weak sustainability the measurement of sustainable development is not without considerable difficulties yet this should not detract from the positive advances that can be made in this direction in this paper we present one form that a weak sustainability indicator can take derived from a simple but intuitive savings rule it incorporates the idea that the level of overall capital stock should be non decreasing although subject to qualification at this stage some interesting results emerge from the application of the rule to 18 countries

towards an ecological economics of sustainability abstract persistent disagreement both as to the interpretation to be given to sustainability and as to the relation between ecological and economic sustainability has hindered the development of an ecological economics of sustainable resource use this paper identifies the main concepts of sustainability deriving from the two disciplines in order to explore the difference implied by an ecological approach to the problem it is argued that present economic and ecological approaches are largely disjoint and that they address basically different phenomena by combining the efficiency requirements of what is usually thought of as economic sustainability with the stability requirements of an ecological approach it is shown that an intertemporally efficient allocation of resources that satisfies the conditions for constant levels of consumption is not necessary to assure ecological sustainability ecological sustainability requires that the allocation of economic resources should not result in the instability of the economy environment system as a whole

capital accumulation and resource depletion a hartwick rule counterfactual how rich would resource abundant countries be if they had actually followed the hartwick rule invest resource rents in other assets over the past 30 years the authors use time series data on investments and rents on exhaustible resource extraction for 70 countries to answer this question the results are striking gabon trinidad and tobago and venezuela would all be as wealthy as the republic of korea while nigeria would be five times as well off as it is currently the authors also derive a more general rule for sustainability maintain positive constant genuine investment and use this to draw further empirical results

the greenhouse effect and intergenerational transfer abstract the scientific basis for understanding the economic issues involved in the greenhouse effect is outlined four important aspects of the problem are identified and discussed irreversibility international and institutional constraints uncertainty and intergenerational equity attention is focused upon the intertemporal choice problem a model describing the potential for intergenerational transfers under the uncertainty of climatic change due to fossil fuel combustion is presented we conclude intergenerational compensation can be achieved by investment in capital or technology or by bequest and is ethically required regardless of any other action

savings growth and the resource curse hypothesis an important connection between recent attempts to understand the determinants of economic growth and the measurement of sustainability is the finding of a negative and significant relationship between natural resource abundance and economic growth this is the so called resource curse hypothesis using cross country regressions we offer evidence that the curse may itself be a manifestation of the inability of governments to manage large resource revenues sustainably in particular these results offer another perspective on the resource curse hypothesis the countries where growth has lagged are those where the combination of natural resource macroeconomic and public expenditure policies have led to a low rate of genuine saving net saving adjusted for resource depletion

overlapping generations or infinitely lived agents intergenerational altruism and the economics of global warming do we need an overlapping generations model for the economics of global warming to answer this question an infinitely lived agent ila approach and an overlapping generations olg model are contrasted ila and olg can be viewed as polar representations of intergenerational altruism with ila an immortal agent acts through his investment savings decisions as trustee on the behalf of the future generations with olg agents need not behave altruistic they simply save during working years and dissave completely during retirement nevertheless ila and olg must not differ in their implication for greenhouse policy greenhouse gas abatement is a straightforward alternative to physical capital formation and even without altruism each age cohort has an incentive to provide current abatement in order to reduce future damages attributable to climate change indeed under reasonable assumptions and parameter values our simulations reveal such an invariance result provided carbon taxes are the only policy tool and tax revenues are recycled through socially mandated rules projections of economic growth climate change and energy consumption are only insignificantly affected by the choice of approach

intertemporal equity and hartwick s rule in an exhaustible resource model in a standard exhaustible resource model it is known that if along a competitive path investment in the augmentable capital good equals the rents on the exhaustible resource known as hartwick s rule then the path is equitable in the sense that the consumption level is constant over time in this paper we show the converse of this result if a competitive path is equitable then it must satisfy hartwick s rule

agriculture natural resources and environmental accounting in this paper we develop atheoretically consistent framework to incorporate theenvironmental effects of agricultural production andthe depletion of natural capital caused byagricultural production into the existing incomeaccounts we apply the framework and adjust theincome attributed to the agricultural sector andeconomy wide net national product nnp for the unitedstates estimated adjustments to the incomeattributed to agriculture are in the range of 4billion and have declined as a percentage of net farmincome since 1982

eliciting prospect theory when consequences are measured in time units time is not money we elicited the prospect theory components utility probability weighting and loss aversion when consequences are expressed as the time dedicated to a specific task or activity a similar elicitation was performed for monetary consequences to allow an across attribute time money comparison of the elicited components at the individual level we obtained less concave utility and smaller loss aversion for time than for money moreover while the probability weighting was predominantly inverse s shaped for both attributes it was less sensitive to probabilities and more elevated for time than for money this finding implies more optimism for gains and more pessimism for losses this paper was accepted by peter wakker decision analysis

the concept of weak sustainability abstract this paper surveys the links between growth theory with exhaustible resources and the concept of weak sustainability it examines the underlying assumptions behind this concept and questions the usefulness of the weak sustainability index as an indicator of sustainable development

environmental equity and sustainability rejecting the kaldor hicks criteria abstract an implementable translation of environmental equity and sustainability is provided for use in benefit cost analysis as such the approach builds on the underlying economic structure of benefit cost analysis while trying to cause it to evolve in ways that take into account issues of greater concern to ecological economists environmental equity and sustainability are interpreted as imposing new decision criteria that require additional benefit cost tests based on actual compensation to identified sub groups of the population this rejects the pre world war ii compromise of economists regarding potential compensation embodied in the kaldor hicks criteria for environmental equity a project is proposed to pass a benefit cost test if the identified group either receives net benefits or is more than compensated for its losses for sustainability a project is proposed to pass a benefit cost test if the compensation is larger than the net value of the resource and the net value of the resource is reinvested

dutch disease and the mitigation effect of migration evidence from canadian provinces this article evaluates whether immigration can mitigate the dutch disease effects associated with booms in natural resource sectors we derive predicted changes in the size of the non tradable sector from a small general equilibrium model a la obstfeld rogoff using data for canadian provinces we find evidence that aggregate immigration mitigates the increase in the size of the non tradable sector in booming regions the mitigation effect is due mostly to interprovincial migration and temporary foreign workers there is no evidence of such an effect for permanent international immigration interprovincial migration also results in a spreading effect of dutch disease from booming to non booming provinces

deforestation and national accounting we construct a first best growing economy in which land is being switched continuously from use in forestry to an alternative use we find that implicitly for such activity to take place there must be no net loss to land owners this implies no deduction in the national accounts for deforestation with soil erosion on deforested land pigovian taxes must be levied to sustain a first best we also observe an optimal tax on households for their implicit use of forests as oxygenation sinks

national account of timber and forest environmental resources in sweden this paper outlines an extension of the national account of income from forest resources in sweden 1987 incorporating changes in timber inventories production of nonmarketed timber and nontimber goods and depletion or improvement in vital environmental stocks such as soil nutrients biodiversity and carbon sinks the total net value added provided by forest resources and forestry labour 1987 is estimated to 22 billions sek this is one third more than the contribution of forestry to ordinary gnp

maximin viability and sustainability the maximin criterion defines the highest utility level that can be sustained in an intergenerational equity perspective the viability approach makes it possible to characterize all the economic trajectories sustaining a given not necessarily maximal utility level in this paper we exhibit the strong links between maximin and viability we show that the value function of the maximin problem can be obtained in the viability framework and that the maximin path is a particular viable path this result allows us to extend the recommendations of the maximin approach beyond optimality to characterize the sustainability of economic trajectories which differ from the maximin path attention is especially paid to non negative net investment at maximin accounting prices which is shown to be necessary to maintain the productive capacity of the economy whether the development path is optimal or not our results provide a new theoretical ground to account for sustainability in imperfect economies based on maximin prices

the capital gains from trade are not enough evidence from the environmental accounts of venezuela and mexico abstract in principle a country cannot endure negative genuine savings for long periods of time without experiencing declining consumption nevertheless theoreticians envisage two alternatives to explain how an exporter of non renewable natural resources could experience permanent negative genuine savings and still ensure sustainability the first one alleges that the capital gains arising from the expected improvement in the terms of trade would suffice to compensate for the negative savings of the resource exporter the second alternative points at technological change as a way to avoid economic collapse this paper uses the data of venezuela and mexico to empirically test the first of these two hypotheses the results presented here prove that the terms of trade do not suffice to compensate the depletion of oil reserves in these two open economies

capital gains and net national product in open economies it is shown within a given framework that with the world economy following an egalitarian path the aggregate capital gains being positive is equivalent to the interest rate tending to decrease this result is of importance for the concept of net national product in open economies in particular with positive aggregate capital gains an open economy cannot sustain consuming the return on its capital stocks since some part of the return must be used to augment the country s national wealth it is established that a country s share of world wide sustainable consumption equals its share of worldwide wealth

wealth natural capital and sustainable development contrasting examples from botswana and namibia theoretical work has demonstrated that sustainable development requires non declining per capita wealth where wealth is defined to include produced natural human and social capital several studies have attempted to measure total national wealth or changes in wealth but have been seriously hampered by a lack of data especially for natural and human capital to address this problem the un and other international statistical agencies developed a standardized framework for environmental accounts the system of integrated environmental and economic accounts seea using the newly available asset accounts for natural capital national wealth accounts are constructed and used to assess the contrasting development paths of botswana and namibia botswana with an explicit policy of reinvestment of resource rents has roughly tripled per capita wealth and national income over the past two decades namibia with no explicit policy to use natural capita to build wealth has seen per capita wealth and income decline

intergenerational altruism and the environment we construct an overlapping generations model of pollution externality in which individuals are altruistically linked to their offspring as in barro 1974 it is shown that steady state consumption may be a decreasing function of the intergenerational degree of altruism despite individuals altruism the competitive equilibrium is not optimal we thus study the social optimum and show that it can be decentralized

resource depletion and sustainability in small open economies abstract exogenous price changes affect the amount that a small country exporting natural resource commodities must invest to sustain its consumption level the necessary amount is given by the difference between hotelling rent and the discounted sum of future terms of trade effects capital gains the latter term is found to be large relative to the former in the case of petroleum depletion in indonesia this suggests that resource rich countries will need to invest more than previously expected to sustain their consumption levels if natural resource prices continue their long term historical decline

conservationist government policies and intergenerational equity in an overlapping generations model with renewable resources abstract this paper shows that in overlapping generations models incorporating renewable natural resources competition may lead to perpetually declining living standards in environments in which it is technically feasible to achieve intergenerationally equitable distributions of consumption first and second best conservationist government policies are examined these include forced nationalization of the entire stock of natural capital government open market purchases and sales of natural capital taxation of industrial use of resources and subsidies to private investments in natural capital

empirical testing of genuine savings as an indicator of weak sustainability a three country analysis of long run trends genuine savings has emerged as a widely used indicator of sustainable development this approach to conceptualising what sustainability is about has strong links to work published by anil markandya and colleagues over 20 years ago in this paper we use long term data stretching back to 1870 to undertake empirical tests of the relationship between genuine savings gs and future well being for three countries britain the usa and germany our tests are based on an underlying theoretical relationship between gs and changes in the present value of future consumption based on both single country and panel results we find evidence supporting the existence of a cointegrating long run equilibrium relationship between gs and future well being and fail to reject the basic theoretical result on the relationship between these two macroeconomic variables this provides some support for the gs measure of weak sustainability

sustainable growth with environmental spillovers in this paper we apply the approach of ramsey and koopmans to the problem of optimal and sustainable growth under plausible assumptions intertemporal neutrality implies that the optimal growth path is sustainable without the contrivance of a sustainability constraint the model is extended to cases involving environmental disamenities the solutions equivalently solve the problem of maximizing net national product adjusted for depreciation in natural capital and environmental effects green net national product in this framework is constant over time thus avoiding the paradox of declining sustainable income

long term substitutability between environmental and man made goods abstract substitutability between environmental and man made goods plays a major role in the sustainability debate the notion of substitutability covers a continuous spectrum with perfect substitutability at one end and poor substitutability at the other in this paper it is shown that if economic growth sustains a sharp distinction emerges between perfect and poor substitutability without any intermediate interpretation of substitutability if poor substitutability prevails environmental resources will eventually constitute the major part of total consumption value we relate our results to baumol s disease and assess the implications of this phenomenon for the compensation of environmental losses

irreversibility and uncertainty cause an intergenerational equity efficiency trade off abstract two important policy goals in intergenerational problems are pareto efficiency and sustainability i e intergenerational equity we demonstrate that the pursuit of these goals is subject to an intergenerational equity efficiency trade off our analysis highlights two salient characteristics of intergenerational problems and policy i temporal irreversibility i e the inability to revise one s past actions and ii uncertainty of future consequences of present actions in human environment systems we employ a two non overlapping generations model that combines an intragenerational production decision on the use of circulating capital and a non renewable resource with a negative intergenerational externality as an unforeseen contingency if initially unknown problems become apparent and policy is enacted after irreversible actions were taken policy making faces a fundamental trade off between ex post pareto efficiency and sustainability that is one can achieve either one of these two goals but not both

an overlapping generations model of growth and the environment this article analyzes the potential conflict between economic growth and the maintenance of environmental quality in an overlapping generations model short lived individuals make decisions which have long lasting effects on both factor productivity and the environment the model provides a theoretical explanation of observed correlations between environmental quality and income whereby economic growth is associated first with declines then improvements in environmental quality it suggests circumstances in which multiple pareto ranked steady state equilibria may arise and in which sustained growth of both capital and environmental quality may occur overmaintenance of the environment analogous to dynamically inefficient overaccumulation of capital may emerge copyright 1994 by royal economic society

national wealth and net national product solow 1986 established that corresponding to constant consumption programs with essential exhaustible resource stocks there was a capital value that was remaining constant he thus obtained a hick s type of result namely that current consumption left capital intact solow was using weitzman 1976 as a point of departure it turns out that there is a quite general solow type of result namely that nnp t is interest on the value of accumulated capital v t where v t can include diminutions in natural resource stocks and the interest rate is the social discount rate a weitzman 1976 result is that nnp t is interest on capital where capital is discounted future optimal consumption the interest rate being the discount rate there is then an attractive duality here forward views of capital discounted future optimal consumption programs at date t coincide with backward views of capital current value of accumulated stocks at date t first we observe the weitzman result as the solved bellman equation in dynamic programming this leads directly to the result that nnp t is interest on the value of accumulated capital next we re work the derivations with an essential exhaustible resource and then with endogenously produced knowledge

limits to substitution and irreversibility in production and consumption a neoclassical interpretation of ecological economics abstract there are many methodological approaches within ecological economics one of the principal modes of analysis is a modified version of the standard neoclassical model this paper examines the parallels which emerge between the ideas of some ecological economists concerning production and the ideas of others concerning consumption when these ideas are interpreted in the neoclassical paradigm it is well known that ecological economics is characterized by arguments concerning limits to substitution between inputs energy natural capital etc vs manufactured capital labor etc in production and the implications these have for sustainability however various authors have also expressed concerns regarding limits to substitution in consumption either between environmental assets and other goods or between basic needs commodities and other goods though the specific reasons for non substitution are different in the production and consumption cases the underlying theme is that individual commodities and other inputs have unique physical or other properties which make them poor substitutes ideas about irreversibility in production and economic development are also prominent in ecological economics likewise many authors have argued for similar irreversibilities in consumption behavior in analogy to the term technological change i coin the term preferential change to describe these phenomena the linking themes in this case are that the economy environment system is evolutionary in character and that external effects intended and unintended consequences of actions or processes imposed on other parties or resources are all pervasive