Economic Policy for Sustainable Growth and Development vs. Greedy Growth and Preservationism
Sustainability science emerged from the felt need to employ appropriate science and technology in the pursuit of sustainable development. The existing sustainability science agenda emphasizes the importance of using a systems approach, stressing the many interactions between natural and human systems. Despite its inertia and avowed purpose of being practical and feasible, however, sustainability science has yet to embrace the policy sciences. In pursuit of this objective, we first trace the history of thought of sustainable development, including its definition and operationalization. Sustainable development encompasses sustainable growth and dynamically efficient development patterns. Two promising approaches to sustainable growth are contrasted. Negative sustainability counsels policy makers to offset any decrease in natural capital with at least the same value of net investment in produced capital. This sustainability criterion cannot determine how and how much to conserve natural capital nor how much to build up human and productive capital. Indeed, there is ambiguity regarding what prices to use in summing the values of diverse capital assets. To fill the void, we offer positive sustainability, which maximizes intertemporal welfare while incorporating system linkages, dynamic efficiency, and intertemporal equity. This provides a solid and operational framework for sustainable growth. In addition, sustainable development must include the lessons from development theory, including how optimal patterns of production, consumption, and trade change with standards of living. However, like Tolstoy’s unhappy families, there are many pathways to unsustainable development. We describe two broad causes of unsustainable growth – rent-seeking and preservationism. We also illustrate patterns of unsustainable development by drawing on lessons from the Philippines. While specialization is the engine of growth, fragmentation is the anchor. In addition to natural fragmentation from natural trade barriers in an island archipelago, policy and governance, driven by rentseeking, promote economic stagnation. Low economic growth in turn exacerbates population pressure and environmental degradation—the vicious circle of unsustainable development. We give particular attention to how a resource curse can exacerbate policy distortions and rent-seeking, and how the same phenomenon can be promulgated by foreign aid, foreign direct investments, remittances, and tourism. For sustainable development not to be at odds with policy science, positive sustainability must be combined with projects and policies that promote dynamic comparative advantage and poverty reduction. We emphasize the facilitative role of government especially in transforming the vicious circle into a virtuous circle.
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