The Economics of Sustainability

John C.V. Pezzey, Michael A. Toman

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9780754621775
• eBook ISBN: 9781351890984
• Edition: 1
• Topic: Business
• Subtopic: Geography
• Index: Business

Before the late 1980s, when the ideas of sustainability and sustainable development to the forefront of public debate, conventional, neo-classical economic thinking about development and growth had rarely given any consideration to the needs of future generations, or the sustainability of natural resource use. Defining sustainability broadly as intergenerational fairness in the long-term decision making of a whole society, and using established economic concepts, this selection of refereed journal articles brings a famously ill-defined concept into sharp focus, providing academics at all levels with a formidable research tool. Spanning thirty years of the most important philosophical, theoretical and empirical contributions from both critics and defenders of neo-classical assumptions and methods of economic analysis, this focused collection of papers constitutes a unique, balanced resource on the full range of intellectual debates surrounding the economics of sustainability.

Part I
1974–1986: Responding to ‘Limits to Growth’

[1]


The Optimal Depletion of Exhaustible Resources ^{1, 2}

PARTHA DASGUPTA
LSE and Stanford University

and

GEOFFREY HEAL
University of Sussex

0. INTRODUCTION

0.1. In any given economy there must be a number of commodities that enter into production and which are used up, and whose available stock cannot be increased. Examples like fossil fuels come readily to mind. It would seem reasonable to argue that in the long run the limited availability of these commodities, together with their technological importance, would begin to act as a constraint on the economy’s growth potential. In fact several recent studies have laid great emphasis on this possibility.³ Although the point is an obvious one, most economic studies of the properties of long-run plans neglect it.⁴ In this paper, therefore, we explore in a rather preliminary way the problems that appear to arise naturally when the existence of exhaustible resources is incorporated into the study of intertemporal plans.

It appears that questions in this area are hard to answer. For even in the simplest of environments where it is supposed that there is perfect foresight, one is concerned not merely with the optimal depletion of exhaustible resources but with the optimal rate of investment as well. The two must plainly be interrelated. The latter problem on its own is hard, and the combined problem is very complex. In fact it will appear in the course of the arguments that follow that intuition is not a very good guide for this joint problem. In any case, the assumption of perfect foresight is particularly dubious here since it would appear almost immediate that an investigation of intertemporal plans in the presence of exhaustible resources readily invites consideration of the possibilities of large-scale alterations in technology at dates in the future that are inherently uncertain. Moreover, it is clear that such extensive technological changes would not be achievable costlessly. In this paper, therefore, we attempt to demonstrate how one might, in a relatively simple manner, bring such considerations as these to bear on a set of questions that have generated a considerable amount of interest in recent years.

0.2. It is plain of course that the mere existence of a resource that is exhaustible is not a sufficient basis for apocalyptic visions. Even if we assumed away the possibility of technological change, exhaustible resources would pose a “ problem ” only if they are, in some sense, essential in production. Intuition suggests that one regards a resource as being essential if output of final consumption goods is nil in the absence of the resource. Otherwise, call the resource inessential.¹ It is then natural to ask whether feasible output must eventually decline to zero in an economy that possesses an essential exhaustible resource. Rather surprisingly, perhaps, the answer turns out to be “ no ”, and this even if there is no technological progress.² The point, of course, is that the possibilities open to such an economy depend crucially on the ease with which reproducible inputs can be substituted for the exhaustible resources. It follows, then, that the effect that the existence of an exhaustible resource will have on the characteristics of an optimal plan will depend on the extent of such substitution possibilities. In particular we demonstrate below that the elasticity of substitution between reproducible inputs and exhaustible resources plays an important and a rather direct role in the properties of an optimal plan. A related question that arises is whether one should, as ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgements
• Series Preface
• Introduction
• Part I 1974–1986: Responding to ‘Limits to Growth’
• Part II 1987–1996: The Emergence of a Sustainability Literature
• Part III 1997–2000: A Flourishing but Still Developing Literature
• Name Index