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Should we sustain? And if so, sustain what? Consumption or the quality of life?

  • Humberto Llavador
  • John E. Roemer
  • Joaquim Silvestre

    (Department of Economics, University of California Davis)

Sustainability has been largely replaced by discounted utilitarianism in contemporary climate-change economics. Our approach rejuvenates sustainability by expanding the conception of the quality of life, along the lines of the UN Human Development Reports, to include not only consumption, but also education, leisure, the stock of knowledge and the quality of the biosphere. We report on our results showing that the quality of life can be sustained forever at levels higher than present levels, while reducing GHG emissions to converge to carbon concentrations of 450 ppm. Here we repeat our optimization but substituting consumption for the quality of life. Our sustainability results carry over. As it should be expected, optimal consumption is higher when the objective is consumption rather than the quality of life, but not by much (7% higher). On the other hand, the stock of knowledge is twice as large, and education is four times as large. So if the “true” social welfare index were consumption, a planner who “mistakenly” maximized the quality of life would be making a relatively small error. But the converse error would be large. If the quality of life provides an appropriate welfare index, but the public policy aims at maximizing consumption, the quality of life would be reduced by 60%. The expansion of the concept of welfare beyond consumption renders possible responding to the climate-change challenge by moving away from energy-intensive commodities and towards less intensive ones, like knowledge, education, and leisure.

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File URL: http://wp.econ.ucdavis.edu/12-22.pdf
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Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 1222.

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Length: 41
Date of creation: 26 Sep 2012
Date of revision:
Handle: RePEc:cda:wpaper:12-22
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  1. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2008. "A Dynamic Analysis of Human Welfare in a Warming Planet," Cowles Foundation Discussion Papers 1673, Cowles Foundation for Research in Economics, Yale University.
  2. Charles I. Jones & Peter J. Klenow, 2010. "Beyond GDP? Welfare across Countries and Time," NBER Working Papers 16352, National Bureau of Economic Research, Inc.
  3. D. Gale Johnson, 2000. "Population, Food, and Knowledge," American Economic Review, American Economic Association, vol. 90(1), pages 1-14, March.
  4. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2009. "Intergenerational Justice when Future Worlds Are Uncertain," Cowles Foundation Discussion Papers 1692, Cowles Foundation for Research in Economics, Yale University.
  5. Salvador Ortigueira, 1997. "A Dynamic Analysis of an Endogenous Growth Model with Leisure," Working Papers 9705, Centro de Investigacion Economica, ITAM.
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  7. Asheim,G.B. & Buchholz,W., 2000. "The Hartwick rule : myths and facts," Memorandum 11/2000, Oslo University, Department of Economics.
  8. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  9. Barrett, Scott, 1992. "Economic growth and environmental preservation," Journal of Environmental Economics and Management, Elsevier, vol. 23(3), pages 289-300, November.
  10. Neumayer, Eric, 2001. "The human development index and sustainability -- a constructive proposal," Ecological Economics, Elsevier, vol. 39(1), pages 101-114, October.
  11. Cabeza Gutes, Maite, 1996. "The concept of weak sustainability," Ecological Economics, Elsevier, vol. 17(3), pages 147-156, June.
  12. Gerlagh, Reyer & van der Zwaan, B. C. C., 2002. "Long-Term Substitutability between Environmental and Man-Made Goods," Journal of Environmental Economics and Management, Elsevier, vol. 44(2), pages 329-345, September.
  13. Neumayer, Eric, 1999. "Global warming: discounting is not the issue, but substitutability is," Energy Policy, Elsevier, vol. 27(1), pages 33-43, January.
  14. John Roemer, 2011. "The Ethics of Intertemporal Distribution in a Warming Planet," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(3), pages 363-390, March.
  15. Humberto Llavador & John E. Roemer & Joaquim Silvestre, 2011. "Sustainability in the Presence of Global Warming: Theory and Empirics," Human Development Research Papers (2009 to present) HDRP-2011-05, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
  16. Dixit, Avinash & Hammond, Peter & Hoel, Michael, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 551-56, April.
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