Economic Sustainability
| Scheme of sustainable development: at the confluence of three constituent parts. (2006) |
The Venn diagram of sustainable development has many versions, but was first used by economist Edward Barbier (1987). However, Pearce, Barbier and Markandya (1989) criticized the Venn approach due to the intractability of operationalizing separate indices of economic, environmental, and social sustainability and somehow combining them. They also noted that the Venn approach was inconsistent with the Brundtland Commission Report, which emphasized the interlinkages between economic development, environmental degradation, and population pressure instead of three objectives. Economists have since focused on viewing the economy and the environment as a single interlinked system with a unified valuation methodology (Hamilton 1999, Dasgupta 2007). Intergenerational equity can be incorporated into this approach, as has become common in economic valuations of climate change economics (Heal 2009). Ruling out discrimination against future generations and allowing for the possibility of renewable alternatives to petro-chemicals and other non-renewable resources, efficient policies are compatible with increasing human welfare, eventually reaching a golden-rule steady state (Ayong le Kama 2001 and Endress et al. 2005). Thus the three pillars of sustainable development are interlinkages, intergenerational equity, and dynamic efficiency (Stavins et al. 2003).
Arrow et al. (2004) and other economists (e.g. Asheim,1999 and Pezzey, 1989 and 1997) have advocated a form of the weak criterion for sustainable development – the requirement than the wealth of a society, including human capital, knowledge capital and natural capital (as well as produced capital) not decline over time. Others, including Barbier 2007, continue to contend that strong sustainability – non-depletion of essential forms of natural capital – may be appropriate.
Economic development has traditionally required a growth in the gross domestic product. This model of unlimited personal and GDP growth may be over. Sustainable development may involve improvements in the quality of life for many but, particularly for the affluent, may necessitate a decrease in resource consumption.
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