SUSTAINABLE

DEVELOPMENT 1

Prof. Prabha Panth,

Osmania University, Hyd

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.

Prabha Panth

25-Apr-15 3

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.

Prabha Panth

25-Apr-15 4

Three aspects of SD

Economic

SocialEnvironment

Sustainable

development

Prabha Panth

25-Apr-15 5

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.

Prabha Panth

25-Apr-15 6

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.

Prabha Panth

25-Apr-15 7

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.

Prabha Panth

25-Apr-15 8

• 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.

Prabha Panth

25-Apr-15 9

• 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.

Prabha Panth

25-Apr-15 10

• 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.

Prabha Panth

25-Apr-15 11

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.”

Prabha Panth

25-Apr-15 12

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.

Prabha Panth

25-Apr-15 13

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

Prabha Panth

25-Apr-15 14

• 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.

Prabha Panth

25-Apr-15 15

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.

Prabha Panth

25-Apr-15 16

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.

Prabha Panth