Post on 19-Jul-2015
transcript
25-Apr-15 2
Definition of Sustainable
Development:
• Brundtland’s definition in his book Our
Common Future (1987)
“Sustainable development is development
that meets the needs of the present
generation, without compromising the
ability of future generations to meet their
own needs.
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Main themes of SD
1. Poverty Focus – Development should satisfy
needs of present generation,
2. Future Focus – Environmental resources should
be conserved for future generations to meet
their own needs
3. Technology Focus –To change technology to
achieve ecofriendly development.
4. Environmental Focus – developmental policies
to change based on limits to growth due to
environmental degradation.
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Theories of sustainable
development
• Weak Sustainability theory: based on the
Neo-classical principle of substitution of
capital.
• Strong Sustainability theories: no
substitution of physical and natural capital
• Very Strong Sustainability theories: based
on ecological approaches to development.
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WEAK SUSTAINABILITY
THEORY
• Hartwick, Solow, Dasgupta have
contributed to Weak Sustainability Theory.
Objective of Weak Sustainable Theory:
1. To maintain non-declining per capita
human welfare over time.
2. To combine efficiency and equity
principles in development.
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Assumptions:
1. Welfare W = f(U): welfare is a function of
Utility;
– U = f(C): Utility is a function of
Consumption;
– C = f(Y): Consumption is a function of
income; and
– Y =f(K): Income is a function of Capital.
2. K = KM + KN, where KM = manmade
capital and KN = natural capital.
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• K is homogeneous, so KM and KN are perfect substitutes.
• The same amount of welfare (income) can be generated and maintained either by KM or KN.
• Full employment and optimum allocation of all resources,
• To achieve inter-generational equity,
• Techno-centric – technology will find solutions.
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• Objective: To sustain the present levels of Y, C
and Welfare over time, in the face of depletion of
non-renewable resources, and to achieve inter-
generational equity.
• The Model:
Y = f (K) - - - - - - (i)
or Y = f (KM, KN) - - - - - - (ii)
• As Y, KM increases, but KN gets depleted.
• To maintain the same level of income,
total K should be kept constant.
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• Therefore since they assume that KM is a
substitute for KN,
• KM should increase at the same rate as KN
decreases.
• Then total K will remain constant,
• If total K is constant, Y is also constant.
• Then C and welfare will also remain
constant.
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Hartwick’s Rule:
• The essence of the Weak Sustainability
theory is given by Hartwick’s rule.
• Hartwick’s Rule:
“The stock of capital can be held constant
by reinvesting all Hotelling rents from non-
renewable resource extraction (KN) into
man-made capital (KM), to maintain real
consumption over time.”
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Rs
0NRR reserves
HARTWICK’S RULE
AR
100 MN TNS
P0
MEC
Q0
A
P1B
Q1
C
Hotelling rent
As development
takes place, the
stock of natural
resource is
depleted. This
raises its price to
P1, and generates
Hotelling rent =
BC.
According to
Solow and
Hartwick, this rent
should not be
consumed, but
invested in
production of KM.
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K=KM + KN ------------ 1
• KM is man-made capital, KN is natural capital. Addition to capital stock, is given by:
dK = d(KM + KN ) 0 ------------ 2
dt dt
• Net addition to capital stock equals gross investment minus depreciation:
dK = St – Kt ------------- 3
dt
• where St = Savings = Investment in time t, and Kt = depreciation of overall capital stock in t
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• Combining (2) and (3), net capital should be positive:
St – Kt 0 ------ 4
or St – (KMt + KNt) 0
St – (KMt ) KNt ------- 5
Addition to physical capital should be equal to or greater than depletion of natural capital.
This is the condition for Weak Sustainability.
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Limitations1. K is not homogeneous and so physical
capital (KM) and natural resources (KN) are not substitutes.
2. KN is complementary to KN.
3. Pollution impacts of development ignored. Higher pollution leads to unsustainable development.
4. Assumes all types of environmental degradation can be measured in monetary terms.
5. Based on Economic sustainability; recommends that the present pattern of economic development should continue unabatedly.
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6. Environmental sustainability not discussed. Permits natural capital to be exhausted, as long as physical capital increases.
7. Inter-generational equity not shown.
8. Intra-generation equity not discussed – how should less-developed countries achieve sustainable development, or how should environmental resources be redistributed in the world at present.
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