Economics of sustainability or the sustainability of economics: Different paradigms

Klaassen, G.A.J. & Opschoor, J.B. (1991). Economics of sustainability or the sustainability of economics: Different paradigms. Ecological Economics 4 (2) 93-115. 10.1016/0921-8009(91)90024-9.

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Abstract

This article reviews different views of neo-classical and ecological economics on the sustainability of economic growth and welfare. Neo-classical economics concludes that, due to substitution and technical progress, consumption can be sustained even if production depends on a natural resource that is being depleted. If production depends on an essential, renewable resource, there is a level of consumption that can be sustained forever. Pollution lowers the level of consumption that can be sustained. If production depends on an exhaustible resource, recycling of waste is insufficient for sustaining consumption unless 100% recycling is possible. Sustainable economic development is possible if the resource growth potential exceeds the sum of the discount rate minus the rate of exogenous technical progress and if resource productivity is sufficiently high. In addition, intial levels of environmental quality (a composite of pollution and natural resources) and man-made capital influence the possibilities for sustainable economic development. If the resource stock itself affects utility, or if irreversibilities occur, optimal consumption and extraction are lowered. Ecological economics states that: substitution possibilities are restricted, full recycling of waste is impossible, and the limited influx of solar energy poses an additional constraint on the level of production that can be sustained. Since the functions of the environment (production factor, consumer good and waste sink) are intertwined, this life support function poses a restriction on economic growth as well. In ecological economics development is viewed as an evolutionary process with continuous feedbacks between a changing economy and environment. Welfare is not merely the sum of discounted individual preferences but requires environmental compatibility and the explicit (collective) formulation of policies regarding the conservation of species, ecosystems and natural resources.

Item Type:	Article
Research Programs:	Environmentally Compatible Energy Strategies (ECS)
Depositing User:	Romeo Molina
Date Deposited:	18 Apr 2016 11:30
Last Modified:	27 Aug 2021 17:40
URI:	https://pure.iiasa.ac.at/12758

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