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Evaluating Projects and Assessing Sustainable Development in Imperfect Economies

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Author Info
Kenneth Arrow (Research Initiative on the Environment, the Economy, and Sustainable Welfare, Stanford University, Stanford)
Partha Dasgupta (Faculty of Economics of Cambridge and St. John’s College, Cambridge)
Karl-Göran Mäler (Beijer International Institute of Ecological Economics, Stockholm)

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Abstract

We are interested in three related questions: (1) How should accounting prices be estimated? (2) How should we evaluate policy change in an imperfect economy? (3) How can we check whether intergenerational well-being will be sustained along a projected economic programme? We do not presume that the economy is convex, nor do we assume that the government optimizes on behalf of its citizens. We show that the same set of accounting prices should be used both for policy evaluation and for assessing whether or not intergenerational welfare along a given economic path will be sustained. We also show that a comprehensive measure of wealth, computed in terms of the accounting prices, can be used as an index for problems (2) and (3) above. The remainder of the paper is concerned with rules for estimating the accounting prices of several specific environmental natural resources, transacted in a few well known economic institutions.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2003.109.

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Date of creation: Dec 2003
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Handle: RePEc:fem:femwpa:2003.109

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Related research
Keywords: Sustainable development; Imperfect economies;

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Find related papers by JEL classification:
D6 - Microeconomics - - Welfare Economics
D9 - Microeconomics - - Intertemporal Choice and Growth
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
O2 - Economic Development, Technological Change, and Growth - - Development Planning and Policy
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Geir Asheim & Taoyuan Wei, 2009. "Sectoral Income," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(1), pages 65-87, January. [Downloadable!] (restricted)
    Other versions:
    • Asheim , Geir B. & Wei , Taoyuan, 2007. "Sectoral income," Memorandum 23/2007, Oslo University, Department of Economics. [Downloadable!]
  2. Karl-Göran Mäler, 2008. "Sustainable Development and Resilience in Ecosystems," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(1), pages 17-24, January. [Downloadable!] (restricted)
  3. Craig Bond & Y. Farzin, 2008. "Alternative Sustainability Criteria, Externalities, and Welfare in a Simple Agroecosystem Model: A Numerical Analysis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(3), pages 383-399, July. [Downloadable!] (restricted)
  4. Partha Dasgupta, 2008. "Nature in Economics," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(1), pages 1-7, January. [Downloadable!] (restricted)
  5. Asheim, Geir B., 2005. "Can NNP be used for welfare comparisons?," Memorandum 24/2005, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  6. Dimitra Vouvaki & Anastasios Xepapadeas, 2005. "Criteria for Assessing Sustainable Development: Theoretical Issues and Empirical Evidence for the Case of Greece," Working Papers 0511, University of Crete, Department of Economics. [Downloadable!]
    Other versions:
  7. William Brock & Anastasios Xepapadeas, 2004. "Ecosystem Management in Models of Antagonistic Species Coevolution," Working Papers 0503, University of Crete, Department of Economics. [Downloadable!]
  8. Asheim, Geir B., 2005. "Welfare comparisons between societies with different population sizes and environmental characteristics," Memorandum 25/2005, Oslo University, Department of Economics. [Downloadable!]
  9. Glenn-marie Lange, 2004. "Wealth, Natural Capital, and Sustainable Development: Contrasting Examples from Botswana and Namibia," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 29(3), pages 257-283, November. [Downloadable!] (restricted)
  10. Li, Chuan-Zhong & Isacsson, Gunnar, 2009. "Valuing urban accessibility and air quality in Sweden: A regional welfare analysis," Working Paper Series 2009:2, Uppsala University, Department of Economics. [Downloadable!]
  11. Bazhanov, Andrei, 2008. "Sustainable growth in a resource-based economy: the extraction-saving relationship," MPRA Paper 12350, University Library of Munich, Germany. [Downloadable!]
  12. Sumaila, Ussif Rashid & Berman, Matthew, 2006. "Thalassorama - Discounting, Amenity Values, and Marine Ecosystem Restoration," Marine Resource Economics, Marine Resources Foundation, vol. 21(2). [Downloadable!]
  13. Bond, Craig, 2006. "Multi-Sector Sustainability in Agroecosystem Environments: Using Value Function Iteration for Numerical Solutions," 2006 Annual meeting, July 23-26, Long Beach, CA 21039, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  14. Bazhanov, Andrei, 2008. "Maximin-optimal sustainable growth in a resource-based imperfect economy," MPRA Paper 16245, University Library of Munich, Germany, revised 01 Aug 2009. [Downloadable!]
  15. Li, Chuan-Zhong & Löfgren, Karl-Gustaf, 2003. "Evaluating Projects in a Dynamic Economy: Some New Envelope Results," UmeÃ¥ Economic Studies 613, Umeå University, Department of Economics, revised 04 Dec 2006. [Downloadable!]
    Other versions:
  16. Sato, Masayuki & Samreth, Sovannroeun, 2008. "Assessing Sustainable Development by Genuine Saving Indicator from Multidimensional Perspectives," MPRA Paper 9996, University Library of Munich, Germany. [Downloadable!]
  17. Andrei V. Bazhanov, 2009. "A constant-utility criterion linked to an imperfect economy affected by irreversible global warming," EERI Research Paper Series EERI_RP_2009_03, Economics and Econometrics Research Institute (EERI). [Downloadable!]
  18. Bazhanov, Andrei & Belyaev, Alexander, 2009. "Адекватность Закрытой Модели Для Российской Экономики В Задаче Сравнительного Анализа Энергетической Стра�," MPRA Paper 15109, University Library of Munich, Germany. [Downloadable!]
  19. Partha Dasgupta, 2009. "The Welfare Economic Theory of Green National Accounts," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(1), pages 3-38, January. [Downloadable!] (restricted)
  20. Asheim, Geir, 2003. "Green national accounting for welfare and sustainability: A taxonomy of assumptions and results," Memorandum 31/2002, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
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