Concepts of sustainability
Lectures in resource economics
Spring 2004, Part 3
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability
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What is it?
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Why are we concerned? Modern technology enables
Present well-being can be shared by future generations.
the present generation to destroy the resource base.
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Why should we care?
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How can we tell? Does market information indicate
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What can we do about it? What rules for sustainable
Positive net productivity
means negative costs of transfer to the future.
whether development is sustainable?
resource management can we implement?
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: What is it?
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“… development that meets the needs of the
present without compromising the ability of
future generations to meet their own needs”
(World Commission on Environment and Development, 1987, p.43)
The Brundtland comm. is concerned with two groups:
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the poor of the present generation
future generations
We will concentrate on the question of intergen. distrib.
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: What is it?
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In words: That the present generation manages
its stocks of manmade and natural capital so
that the present level of well-being can potentially be enjoyed by all future generations.
Formally: Let Ct indicate the well-being of generation t. Includes everything that influences the
situation of generation t, not only material consumption, but also environmental amenities etc.
Say that generation t behaves in a sustainable
manner if it is feasible to sustain a level of wellbeing C* from t on, where C* ≥ Ct .
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: What is it?
Some alternative definitions:
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Sustained development: Non-decreasing well-being.
An inflexible definition of sustainability.
Survivable development: It is feasible to maintain
C* where C* ≥ CSURV is the minimum well-being
needed to survive. A weak definition of sustainability.
Maintaining production opportunities for the
future: What does this mean?
Non-decreasing wealth: Multiple capital goods
(man-made & natural) Relative capital prices change
over time — what is meant?
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: What is it?
More alternative definitions:
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Non-decreasing stocks of natural capital.
(a) Maintain natural capital as an aggregate; how can
we tell? (b) Maintain each stock of natural capital;
cannot natural resource depletion be compensated?
Satisfy minimum conditions of ecosystem
stability and resilience. Necessary for sustainability
to maintain functioning ecosystems.
Scope:
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Anthropocentric?
Regional?
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: Why should we care?
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Sustainability is an asymmetric criterion: The
future should be at least as good off as the present. Is
there a normative basis for this asymmetry? Is it
compatible with equal treatment of all generations?
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Key observation: With positive net capital
productivity, there is a negative cost of transfer from
the present to the future. If the present is better off
than the future, then one can both increase the size
of the “cake” and share it more equally.
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G.B. Asheim, nat.res. 3, updated 04.02.2004
Sustainability: Why should we care?
Properties for social preferences:
Condition on
technology
Equity
Productivity
Efficiency
Continuity
Completeness
UC
DC
Only non-decreasing
Asheim, Buchholz & Tungodden,
distributions are undominated. Justifying sustainability, JEEM 01.
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: How can we tell?
Given the observation that
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accumulation of various forms of man-made capital
(machines, knowledge) compensates for
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depletion of various forms of natural resources,
how can we determine whether developm. is sustainable?
Two questions:
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Is the compensation sufficient?
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Are natural resources becoming scarce?
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: How can we tell?
Calculate the ‘genuine savings indicator’ (GSI): Does
the market prices or calculated value of net investment in
man-made capital exceed the market prices or calculated
value of net depletion of natural capital? Problems:
Is it possible to find market prices or estim. calculated
values for all kinds of manmade and natural capital?
Under what conditions do the genuine savings
indicator indicate sustainability?
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Hartwick’s rule (Hartwick, 1977) does not mean that the
Buchholz & Withagen, The
GSI indicates sustainability. Asheim,
Hartwick rule: Myths and facts, ERE 03.
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: How can we tell?
Resource prices as
scarcity measures:
Check whether the
market prices of natural
resources increase.
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What conclusion can
be drawn if resource
prices do not increase
in spite of extraction?
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: What can we do about it?
Rules for sustainable resouce management
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Weak sustainability: Ensure a non-negative GSI.
Problems: ▫ GSIs are not reliable.
▫ Do we know whether man-made capital can substitute for natural capital?
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Strong sustainability: Maintain each nat. res. stock.
Problems: ▫ What to do about non-renewable resources?
▫ Development is not a stationary process.
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: What can we do about it?
How to implement sustainability in a democracy?
In a representative democracy, decisions are taken on behalf
on the present generation. Why should such a democracy
wish to implement a different intergenerational distribution
than the one that results from a market equilibrium?
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Bequests may have external effects
Bequests favoring one’s own descendents may be of
value for others by contributing to a sustainable future.
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Effects on intertemporal preferences of sustainability
indicators. Information indicating a unsustainable
future may influence our bequest motives.
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: What can we do about it?
Instruments for intergenerational transfers.
„ Ensure that the market system functions in a nonwasteful manner.
Create property rights for natural resources.
Internalize external effects e.g. by means of Pigou taxes
and tradable quotas. This is, however, not sufficient to
ensure sustainability if bequest motives are too weak.
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Provide information that indicates whether
development is sustainable. If not, then this can
influence individual and social bequest motives.
G.B. Asheim, nat.res. 3, updated 04.02.2004
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Sustainability: What can we do about it?
Instruments for intergenerational transfers (cont).
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Contribute – preferably through intergenerational
co-operation – to the conservation of renewable
resources in a productive state.
Helps maintaining the Earth’s capacity to produce food
and preventing climate change.
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Encourage technological progress that leads to more
productive resource use rather than more productive
resource extraction.
G.B. Asheim, nat.res. 3, updated 04.02.2004
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