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A One-sided Sustainability Test With Multiple Consumption Goods

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Author Info
John C. V. Pezzey () (Centre for Resource and Environmental Studies, Australian National University)
Abstract

In an economy with multiple consumption goods (including environmental amenities) that uniquely maximises the present value of utility with constant discounting, constant or falling augmented green net national product, or zero or negative augmented net investment, at any time implies that the economy is unsustainable then. "Augmented" means that time is treated as a productive stock, so augmented net investment includes the value of time. This allows future exogenous technical progress and changes in world prices to be included in a unified accounting framework, along with features such as resource depletion, pollution and foreign investment. The practical and philosophical rationale for testing sustainability in a present-value maximising, and therefore fully prescribed, development path are discussed.

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Paper provided by Australian National University, Centre for Resource and Environmental Studies, Ecological Economics Program in its series Working Papers in Ecological Economics with number 0201.

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Date of creation: Feb 2002
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Handle: RePEc:anu:wpieep:0201

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Web page: http://incres.anu.edu.au/EEP/wp.html

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  10. Asheim, Geir B, 1997. " Adjusting Green NNP to Measure Sustainability," Scandinavian Journal of Economics, Blackwell Publishing, vol. 99(3), pages 355-70, September. [Downloadable!] (restricted)
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  12. Hamilton, Kirk, 1996. "Pollution and Pollution Abatement in the National Accounts," Review of Income and Wealth, Blackwell Publishing, vol. 42(1), pages 13-33, March.
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  23. Asheim, Geir B., 2000. "Green national accounting: why and how?," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 25-48, February. [Downloadable!]
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  24. Sefton, J. A. & Weale, M. R., 1996. "The net national product and exhaustible resources: The effects of foreign trade," Journal of Public Economics, Elsevier, vol. 61(1), pages 21-47, July. [Downloadable!] (restricted)
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