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A One-sided Sustainability Test With Multiple Consumption Goods

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  • 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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  19. Asheim, Geir B, 1994. " Net National Product as an Indicator of Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(2), pages 257-65.
  20. Vellinga, Nico & Withagen, Cees, 1996. "On the Concept of Green National Income," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 499-514, October.
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  25. Asheim, Geir B, 1997. " Adjusting Green NNP to Measure Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(3), pages 355-70, September.
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