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Sustainability and Surplus

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  • Haider A. Khan

    (GSIS, University of Denver)

Abstract

In this paper we present two new concepts for studying sustainability. The first is the idea of an environmentally adjusted surplus(ES). The classical concept of surplus is revised to approximate the total available discretionary income for the society under ordinary (capitalist) growth process.ES is an operationalizable concept. We demonstrate this here via a simplified but illustrative exercise. Work with large data sets employing social and environmental accounting will yield sharper and more accurate results. Our second contribution is the concept of a modified stationary state. Recognition of the economic uncertainty and limits to calculations leads naturally to the idea that both individual and social rationality is bounded. Under the bounded rationality hypothesis MSS is a more appropriate concept for sustainability than the ones currently adhered to. This includes Boulding's definition of steady state as well.It is our hope that with these new concepts at hand the analysis and policy prescriptions regarding a sustainable future can proceed more realistically. Together they also suggest a new research program for environmental and ecological economics.Some components of this program will be identifying and estimating ES sectorally and in aggregate, mapping the transition paths to MSS, and most importantly asking what modifications and changes in our socio-economic and political institutions are necessary to make this transition possible. Since the MSS is to be achieved in the future but choices must be made now, an inter-temporal allocation problem between the present and future generations is involved. We need to ask: "How will the rights of future generations be defined, and how will enforcing those rights influence allocation decisions?" This is one of the most important institutional questions in a global setting as well. In the absence of appropriate international institutions with enforcing authority, nation states will define and enforce these rights in a haphazard manner. In the worst case they will do nothing. In order to avoid such an impasse, we have proposed the somewhat novel concept of a modified stationary state of a sustainable economy. The illusion that ever-higher levels of consumption will yield ever-higher levels of satisfaction provides support at the individual level for a system of indefinite expansion that in the long run is simply not viable. It is not viable because, in a world of finite resources and pollution-absorption capacity, any system that depends on continuing expansion of production or "throughput" cannot be sustained. Ultimately, such a system will have to be a "modified stationary state" which is possible in a world where agents have bounded rationality but also forward looking abilities.

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Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-464.

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Length: 29 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:tky:fseres:2007cf464

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