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A characterization of sustainability with indicators

  • Martinet, Vincent

Economists favor the use of criteria to characterize sustainability. In practice, policy-makers use indicators, i.e., measurements based on the current economic state and decisions, representing given sustainability issues. In this paper, I introduce a criterion characterizing sustainability with indicators and thresholds acting as constraints. I interpret the thresholds as minimal rights to be guaranteed to all generations, and define sustainable trajectories as those satisfying all the constraints at all times. The new criterion is a "generalized" maximin criterion. The approach is applied to a simple production-consumption economy with non-renewable resources. To derive some policy recommendations on the use of indicators to deal with sustainability, I discuss the implications of such a criterion in terms of trade-off between sustainability thresholds, efficiency, and time-consistency. In particular, the resulting problem is time-inconsistent, and sustainability thresholds may be revised over time. Following the time-inconsistent policy based on indicators, with dynamic revision of the thresholds, may, however, result in a sustained utility path, and even in utility growth.

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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 61 (2011)
Issue (Month): 2 (March)
Pages: 183-197

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Handle: RePEc:eee:jeeman:v:61:y:2011:i:2:p:183-197
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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