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Are We Consuming Too Much?

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Author Info

  • Kenneth Arrow
  • Partha Dasgupta
  • Lawrence Goulder
  • Gretchen Daily
  • Paul Ehrlich
  • Geoffrey Heal
  • Simon Levin
  • Karl-Göran Mäler
  • Stephen Schneider
  • David Starrett
  • Brian Walker

Abstract

This paper articulates and applies frameworks for examining whether consumption is excessive. We consider two criteria for the possible excessiveness (or insufficiency) of current consumption. One is an intertemporal utility-maximization criterion: actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility. The other is a sustainability criterion, which requires that current consumption be consistent with non-declining living standards over time. We extend previous theoretical approaches by offering a formula for the sustainability criterion that accounts for population growth and technological change. In applying this formula, we find that some poor regions of the world are failing to meet the sustainability criterion: in these regions, genuine wealth per capita is falling as investments in human and manufactured capital are not sufficient to offset the depletion of natural capital.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/0895330042162377
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 18 (2004)
Issue (Month): 3 (Summer)
Pages: 147-172

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Handle: RePEc:aea:jecper:v:18:y:2004:i:3:p:147-172

Note: DOI: 10.1257/0895330042162377
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References

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  1. Kenneth Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "Evaluating Projects and Assessing Sustainable Development in Imperfect Economies," Working Papers 2003.109, Fondazione Eni Enrico Mattei.
  2. Heal, G., 1998. "Valuing the Future: Economic Theory and Sustainability," Papers 98-10, Columbia - Graduate School of Business.
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  4. Asheim, Geir B, 1994. " Net National Product as an Indicator of Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(2), pages 257-65.
  5. Dasgupta, Partha & M Ler, Karl-G Ran, 2000. "Net national product, wealth, and social well-being," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 69-93, February.
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  7. Hughes, J. Donald, 2000. "Something New Under the Sun: An Environmental History of the Twentieth-Century World. By John R. McNeill. New York: W. W. Norton, 2000. Pp. xxvi, 42 1. $29.95," The Journal of Economic History, Cambridge University Press, vol. 60(04), pages 1172-1174, December.
  8. Susan M. Collins & Barry P. Bosworth, 1996. "Economic Growth in East Asia: Accumulation versus Assimilation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 135-204.
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  12. Asheim, Geir, 2003. "Green national accounting for welfare and sustainability: A taxonomy of assumptions and results," Memorandum 31/2002, Oslo University, Department of Economics.
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  17. Robert E. Hall, 1988. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  18. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, vol. 13(2), pages 333-56, May.
  19. Myles,Gareth D., 1995. "Public Economics," Cambridge Books, Cambridge University Press, number 9780521497695, December.
  20. Howarth, Richard B., 1996. "Status effects and environmental externalities," Ecological Economics, Elsevier, vol. 16(1), pages 25-34, January.
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  22. D. Gale Johnson, 2000. "Population, Food, and Knowledge," American Economic Review, American Economic Association, vol. 90(1), pages 1-14, March.
  23. Dasgupta, Partha, 1990. "The Environment as a Commodity," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 51-67, Spring.
  24. Pearce, David & Hamilton, Kirk & Atkinson, Giles, 1996. "Measuring sustainable development: progress on indicators," Environment and Development Economics, Cambridge University Press, vol. 1(01), pages 85-101, February.
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  26. Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
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