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Are We Consuming Too Much?

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

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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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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  1. Dasgupta, P., 1990. "The Environment as Commodity.i," Research Paper 84, World Institute for Development Economics Research.
  2. W.A. Brock & D. Starrett, 2003. "Managing Systems with Non-convex Positive Feedback," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(4), pages 575-602, December.
  3. Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  4. 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.
  5. Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
  6. Asheim, Geir, 2003. "Green national accounting for welfare and sustainability: A taxonomy of assumptions and results," Memorandum 31/2002, Oslo University, Department of Economics.
  7. D. Gale Johnson, 2001. "On Population and Resources: A Comment," Population and Development Review, The Population Council, Inc., vol. 27(4), pages 739-747.
  8. D. Gale Johnson, 2000. "Population, Food, and Knowledge," American Economic Review, American Economic Association, vol. 90(1), pages 1-14, March.
  9. Michael D. Mastrandrea & Stephen H. Schneider, 2001. "Integrated assessment of abrupt climatic changes," Climate Policy, Taylor & Francis Journals, vol. 1(4), pages 433-449, December.
  10. repec:cup:jechis:v:60:y:2000:i:04:p:1172-1174_49 is not listed on IDEAS
  11. Heal, G., 1998. "Valuing the Future: Economic Theory and Sustainability," Papers 98-10, Columbia - Graduate School of Business.
  12. Bohn, Henning & Deacon, Robert, 1997. "Ownership Risk, Investment, and the Use of Natural Resources," Discussion Papers dp-97-20, Resources For the Future.
  13. 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.
  14. Kenneth J. Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "The genuine savings criterion and the value of population," Economic Theory, Springer, vol. 21(2), pages 217-225, 03.
  15. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-74, September.
  16. Ng, Yew-Kwang, 1987. "Relative-Income Effects and the Appropriate Level of Public Expenditure," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 293-300, June.
  17. 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.
  18. 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.
  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. Pezzey, J., 1992. "Sustainable Development Concepts; An Economic Analysis," Papers 2, World Bank - The World Bank Environment Paper.
  21. Howarth, Richard B., 1996. "Status effects and environmental externalities," Ecological Economics, Elsevier, vol. 16(1), pages 25-34, January.
  22. Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-16, 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. Cooper, Ben & Garcia-Penalosa, Cecilia & Funk, Peter, 2001. "Status Effects and Negative Utility Growth," Economic Journal, Royal Economic Society, vol. 111(473), pages 642-65, July.
  25. repec:reg:rpubli:132 is not listed on IDEAS
  26. Kenneth Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "Evaluating Projects and Assessing Sustainable Development in Imperfect Economies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(4), pages 647-685, December.
  27. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
  28. repec:cup:cbooks:9780521497695 is not listed on IDEAS
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