Growing concerns over climate change and the potential for large damages due to nonlinear processes underscore the need for a meaningful sustainability assessment of an economy. Economists have developed rigorous approaches to conceptualizing sustainability based on the paradigm of weak sustainability, which relies on extensive substitution among reproducible capital, renewable resources, and exhaustible natural resources. In contrast, strong sustainability emphasizes physical limits to this substitution and the importance of maintaining the resilience of normally functioning biophysical processes. Recent progress in resource and environmental economics has demonstrated the feasibility of incorporating strong sustainability features, including tipping points, uncertainties, and resilience, to assess efficiency and optimal policies. Given that weak sustainability and intertemporal efficiency share a welfare theoretic foundation, we ask: To what extent can these approaches be applied to evaluate sustainability? We highlight recent work on assessing sustainability in imperfect economies and dynamic models of intertemporal welfare that embed strong sustainability features.


Article metrics loading...

Loading full text...

Full text loading...


Literature Cited

  1. Aronsson T, Karl-Gustaf L, Backlund K. 2004. Welfare Measurement in Imperfect Markets: A Growth Theoretical Approach Cheltenham, UK: Edward Elgar [Google Scholar]
  2. Arrow KJ, Bolin B, Costanza R, Dasgupta P, Folke C, Holling CS. et al. 1995. Economic growth, carrying capacity, and the environment. Science 268:520–21 [Google Scholar]
  3. Arrow KJ, Dasgupta P, Goulder LH, Mumford KJ, Oleson K. 2012. Sustainability and the measurement of wealth. Environ. Dev. Econ. 17:3317–53 [Google Scholar]
  4. Arrow KJ, Dasgupta P, Mäler KG. 2003. Evaluating projects and assessing sustainable development in imperfect economies. Environ. Resour. Econ. 26:4647–85 [Google Scholar]
  5. Asheim GB. 2010. Intergenerational equity. Annu. Rev. Econ. 2:1197–222 [Google Scholar]
  6. Asheim GB, Buchholz W. 2003. The malleability of undiscounted utilitarianism as a criterion of intergenerational justice. Economica 70:405–22 [Google Scholar]
  7. Asheim GB, Mitra T, Tungodden B. 2012. Sustainable recursive social welfare functions. Econ. Theory 49:267–92 [Google Scholar]
  8. Asheim GB, Weitzman ML. 2001. Does NNP growth indicate welfare improvement. ? Econ. Lett. 73:2233–39 [Google Scholar]
  9. Atkinson G, Mourato S. 2008. Environmental cost-benefit analysis. Annu. Rev. Environ. Resour. 33:317–44 [Google Scholar]
  10. Barbier EB. 2016. Sustainability and development. Annu. Rev. Resour. Econ. 8:261–80 [Google Scholar]
  11. Barbier EB, Koch EW, Silliman BR, Hacker SD, Wolanski E. et al. 2008. Coastal ecosystem-based management with nonlinear ecological functions and values. Science 319:321–23 [Google Scholar]
  12. Barnett HJ, Morse C. 1963. Scarcity and Growth: The Economics of Natural Resource Availability Baltimore, MD: Johns Hopkins Univ. Press [Google Scholar]
  13. Barrieu P, Sinclair-Desgagné B. 2006. On precautionary policies. Manag. Sci. 52:81145–54 [Google Scholar]
  14. Bishop RC. 1978. Endangered species and uncertainty: the economics of a safe minimum standard. Am. J. Agric. Econ. 60:110–18 [Google Scholar]
  15. Bishop RC. 1993. Economic efficiency, sustainability, and biodiversity. AmBio 22:3–469–73 [Google Scholar]
  16. Brock WA, Starrett D. 2003. Managing systems with non-convex positive feedback. Environ. Resour. Econ. 26:4575–602 [Google Scholar]
  17. Cai Y, Judd KL, Lenton TM, Lontzek TS, Narita D. 2015. Environmental tipping points significantly affect the cost-benefit assessment of climate policies. PNAS 112:154606–11 [Google Scholar]
  18. Cai Y, Judd KL, Lontzek TS. 2012. DSICE: A dynamic stochastic integrated model of climate and economy RDCEP Work. Pap. 12-02, Cent. Robust Decis. Mak. Clim. Energy Policy, Univ. Chicago, Chicago. http://dx.doi.org/10.2139/ssrn.1992674 [Google Scholar]
  19. Chen Y, Irwin EG, Jayaprakash C. 2009. Dynamic modeling of environmental amenity-driven migration with ecological feedbacks. Ecol. Econ. 68:102498–510 [Google Scholar]
  20. Chen Y, Jayaprakash C, Irwin EG. 2012. Threshold management in a coupled economic-ecological system. J. Environ. Econ. Manag. 64:3442–55 [Google Scholar]
  21. Chichilnisky G. 2000. An axiomatic approach to choice under uncertainty with catastrophic risks. Resour. Energy Econ. 22:3221–31 [Google Scholar]
  22. Dasgupta P. 1997. Nutritional status, the capacity for work, and poverty traps. J. Econom. 77:15–37 [Google Scholar]
  23. Dasgupta P. 2001. Valuing objects and evaluating policies in imperfect economies. Econ. J. 111:4711–29 [Google Scholar]
  24. Dasgupta P. 2009. The welfare economic theory of green national accounts. Environ. Resour. Econ. 42:13–38 [Google Scholar]
  25. Dasgupta P, Heal G. 1974. The optimal depletion of exhaustible resources. Rev. Econ. Stud. 41:3–28 [Google Scholar]
  26. Dasgupta P, Heal G. 1979. Economic Theory and Exhaustible Resources Cambridge, UK: Cambridge Univ. Press [Google Scholar]
  27. Dasgupta P, Mäler KG. 2000. Net national product, wealth, and social well-being. Environ. Dev. Econ. 5:169–93 [Google Scholar]
  28. Dasgupta P, Mäler KG. 2003. The economics of non-convex ecosystems: introduction. Environ. Resour. Econ. 26:4499–525 [Google Scholar]
  29. Dasgupta P, Ray D. 1987. Inequality as a determinant of malnutrition and unemployment: policy. Econ. J. 97:385177–88 [Google Scholar]
  30. Dietz S, Asheim GB. 2012. Climate policy under sustainable discounted utilitarianism. J. Environ. Econ. Manag. 63:3321–35 [Google Scholar]
  31. Dietz S, Gollier C, Kessler L. 2015. The climate beta Work. Pap. 190, Grantham Inst., Imp. Coll. Lond., London [Google Scholar]
  32. Dietz S, Neumayer E. 2007. Weak and strong sustainability in the SEEA: concepts and measurement. Ecol. Econ. 60:4617–36 [Google Scholar]
  33. Dixit AK, Pindyck RS. 1994. Investment Under Uncertainty Princeton, NJ: Princeton Univ. Press [Google Scholar]
  34. Ekins P. 2014. Strong sustainability and critical natural capital. Handbook of Sustainable Development G Atkinson, S Dietz, E Neumayer, M Agarwala 55–71 Cheltenham, UK: Edward Elgar, 2nd ed.. [Google Scholar]
  35. Farmer MC, Randall A. 1998. The rationality of a safe minimum standard. Land Econ 1:287–302 [Google Scholar]
  36. Fenichel EP, Abbott JK. 2014. Natural capital: from metaphor to measurement. J. Assoc. Environ. Resour. Econ. 1:1/21–27 [Google Scholar]
  37. Fenichel EP, Abbott JK, Bayham J, Boone W, Haacker EM, Pfeiffer L. 2016. Measuring the value of groundwater and other forms of natural capital. PNAS 113:92382–87 [Google Scholar]
  38. Fenichel EP, Gopalakrishnan S, Bayasgalan O. 2015. Bioeconomics: nature as capital. Handbook of Economic Natural Resources R Halvorsen, DF Layton 165–205 Cheltenham, UK: Edward Elgar [Google Scholar]
  39. Fenichel EP, Zhao J. 2015. Sustainability and substitutability. Bull. Math. Biol. 77:2348–67 [Google Scholar]
  40. Fisher AC, Le PV. 2014. Climate policy: science, economics, and extremes. Rev. Environ. Econ. Policy 8:2307–27 [Google Scholar]
  41. Flora CB, Flora JL, Spears JD, Swanson LE. 1992. Rural Communities: Legacy and Change Boulder, CO: Westview [Google Scholar]
  42. Gilboa I, Postlewaite A, Schmeidler D. 2009. Is it always rational to satisfy Savage's axioms?. Econ. Philos. 25:285–96 [Google Scholar]
  43. Gollier C, Jullien B, Treich N. 2000. Scientific progress and irreversibility: an economic interpretation of the ‘Precautionary Principle.’. J. Public Econ. 75:2229–53 [Google Scholar]
  44. Gollier C, Treich N. 2003. Decision-making under scientific uncertainty: the economics of the precautionary principle. J. Risk Uncertain. 27:177–103 [Google Scholar]
  45. Hamilton K. 1995. Sustainable development, the Hartwick rule and optimal growth. Environ. Dev. 5:4393–411 [Google Scholar]
  46. Hamilton K, Clemens M. 1999. Genuine savings rates in developing countries. World Bank Econ. Rev. 13:2333–56 [Google Scholar]
  47. Hamilton K, Hartwick JM. 2005. Investing exhaustible resource rents and the path of consumption. Can. J. Econ. 38:2615–21 [Google Scholar]
  48. Hamilton K, Ruta G. 2009. Wealth accounting, exhaustible resources and social welfare. Environ. Resour. Econ. 42:153–64 [Google Scholar]
  49. Hartwick J. 1977. Intergenerational equity and the investing of rents from exhaustible resources. Am. Econ. Rev. 67:5972–974 [Google Scholar]
  50. Heal G. 2000. Valuing the Future: Economic Theory and Sustainability New York: Columbia Univ. Press [Google Scholar]
  51. Henry C, Henry M. 2002. Formalization and applications of the precautionary principle Work. Pap. 2002009, Inst. Econ. Soc. Res., Kath. Univ. Leuven, Leuven, Belg. [Google Scholar]
  52. Hoehn JP, Randall A. 1989. Too many proposals pass the benefit cost test. Am. Econ. Rev. 79:544–51 [Google Scholar]
  53. Holling CS. 1973. Resilience and stability of ecological systems. Annu. Rev. Ecol. Syst. 4:11–23 [Google Scholar]
  54. Holling CS. 1996. Surprise for science, resilience for ecosystems, and incentives for people. Ecol. Appl. 6:3733–35 [Google Scholar]
  55. Homans F, Horie T. 2011. Optimal detection strategies for an established invasive pest. Ecol. Econ. 70:1129–38 [Google Scholar]
  56. Horan R, Fenichel E, Drury K, Lodge D. 2011. Managing ecological thresholds in coupled environmental-human systems. PNAS 108:7333–38 [Google Scholar]
  57. Izhakian Y. 2015. A theoretical foundation of ambiguity measurement Econ. Work. Pap. ECN-12-01, Stern Sch. Bus., New York Univ., New York [Google Scholar]
  58. Jensen S, Traeger CP. 2014. Optimal climate change mitigation under long-term growth uncertainty: stochastic integrated assessment and analytic findings. Eur. Econ. Rev. 69:104–25 [Google Scholar]
  59. Jevons WS. 1865. The Coal Question: An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of the Coal-Mines New York: Macmillan [Google Scholar]
  60. Klibanoff P, Marinacci M, Mukerji S. 2005. A smooth model of decision making under ambiguity. Econometrica 73:61849–92 [Google Scholar]
  61. Koopmans TC. 1960. Stationary ordinal utility and impatience. Econometrica 1:287–309 [Google Scholar]
  62. Lemoine D, Traeger CP. 2014. Watch your step: optimal policy in a tipping climate. Am. Econ. J. Econ. Policy 6:1137–66 [Google Scholar]
  63. Lontzek TS, Cai Y, Judd KL, Lenton TM. 2015. Stochastic integrated assessment of climate tipping points indicates the need for strict climate policy. Nat. Clim. Change 5:5441–44 [Google Scholar]
  64. Mäler KG. 2008. Sustainable development and resilience in ecosystems. Environ. Resour. Econ. 39:117–24 [Google Scholar]
  65. Mäler KG, Li CZ. 2010. Measuring sustainability under regime shift uncertainty: a resilience pricing approach. Environ. Dev. Econ. 15:6707–19 [Google Scholar]
  66. Mäler KG, Xepapadeas A, De Zeeuw A. 2003. The economics of shallow lakes. Environ. Resour. Econ. 26:4603–24 [Google Scholar]
  67. Margolis M, Nævdal E. 2008. Safe minimum standards in dynamic resource problems: conditions for living on the edge of risk. Environ. Resour. Econ. 40:3401–23 [Google Scholar]
  68. Martin IWR, Pindyck RS. 2015. Averting catastrophes: the strange economics of Scylla and Charybdis. Am. Econ. Rev. 105:102947–85 [Google Scholar]
  69. Meinshausen M, Meinshausen N, Hare W, Raper SCB, Frieler K. et al. 2009. Greenhouse-gas emission targets for limiting global warming to 2°C. Nature 458:72421158–62 [Google Scholar]
  70. Millner A, Dietz S, Heal G. 2013. Scientific ambiguity and climate policy. Environ. Resour. Econ. 55:121–46 [Google Scholar]
  71. Murray A, Gopalakrishnan S, McNamara D, Smith M. 2013. Progress in coupling models of human and coastal landscape change. Comput. Geosci. 53:30–38 [Google Scholar]
  72. Nævdal E. 2003. Optimal regulation of natural resources in the presence of irreversible threshold effects. Nat. Resour. Model. 16:3305–33 [Google Scholar]
  73. Nævdal E. 2006. Dynamic optimization in the presence of threshold effects when the location of the threshold is uncertain-with an application to a possible disintegration of the Western Antarctic Ice Sheet. J. Econ. Dyn. Control 30:71131–58 [Google Scholar]
  74. Nævdal E, Oppenheimer M. 2007. The economics of the thermohaline circulation—a problem with multiple thresholds of unknown locations. Resour. Energy Econ. 29:4262–83 [Google Scholar]
  75. Nguyen HT. 2015. Epistemic uncertainty modeling: the-state-of-the-art. Integrated Uncertainty in Knowledge Modelling and Decision Making: 4th International Symposium, IUKM 2015, Nha Trang, Vietnam, October 15–17, 2015, Proceedings Y Tang, V-N Huynh, J Lawry 1–10 Berlin: Springer [Google Scholar]
  76. Nordhaus W. 2007. A review of the Stern review on the economics of climate change. J. Econ. Lit. 45:686–702 [Google Scholar]
  77. Pearce D, Atkinson G. 1993. Capital theory and the measurement of sustainable development: an indicator of weak sustainability. Ecol. Econ. 8:2103–8 [Google Scholar]
  78. Pearce D, Atkinson G, Mourato S. 2006. Cost-Benefit Analysis and the Environment: Recent Developments Paris: OECD [Google Scholar]
  79. Pearce DW, Markandya A, Barbier E. 1989. Blueprint for a Green Economy London: Earthscan [Google Scholar]
  80. Pezzey JC. 2004. One-sided sustainability tests with amenities, and changes in technology, trade and population. J. Environ. Econ. Manag. 48:1613–31 [Google Scholar]
  81. Pezzey JC, Burke P. 2014. Towards a more inclusive and precautionary indicator of global sustainability. Ecol. Econ. 106:141–54 [Google Scholar]
  82. Pezzey JC, Toman M. 2002. Progress and problems in the economics of sustainability. International Yearbook of Environmental and Resource Economics 2002/2003 T Tietenberg, H Folmer 165–232 Cheltenham, UK: Edward Elgar [Google Scholar]
  83. Polasky S, De Zeeuw A, Wagener F. 2011. Optimal management with potential regime shifts. J. Environ. Econ. Manag. 62:2229–40 [Google Scholar]
  84. Poston T, Stewart I. 1977. Catastrophe Theory for Scientists and Engineers San Francisco: Dover [Google Scholar]
  85. Ramsey FP. 1928. A mathematical theory of saving. Econ. J. 1:543–59 [Google Scholar]
  86. Randall A. 2011. Risk and Precaution Cambridge, UK: Cambridge Univ. Press [Google Scholar]
  87. Randall A. 2014. Weak sustainability, conservation, and precaution. Handbook of Sustainable Development G Atkinson, S Dietz, E Neumayer, M Agarwala 160–72 Cheltenham, UK: Edward Elgar, 2nd ed.. [Google Scholar]
  88. Rawls J. 1971. A Theory of Justice Cambridge, MA: Belknap Press [Google Scholar]
  89. Rockström J, Steffen W, Noone K, Persson Å, Chapin FS. et al. 2009. A safe operating space for humanity. Nature 461:7263472–75 [Google Scholar]
  90. Roe G, Baker M. 2007. Why is climate sensitivity so unpredictable. ? Science 318:5850629–32 [Google Scholar]
  91. Schipper B. 2014. Unawareness—a gentle introduction to both the literature and the special issue. Math. Soc. Sci. 70:1–9 [Google Scholar]
  92. Solow R. 1974. Intergenerational equity and exhaustible resources. Rev. Econ. Stud. Symp. Econ. Exhaustible Resour. 41:29–45 [Google Scholar]
  93. Starrett DA. 1972. Fundamental nonconvexities in the theory of externalities. J. Econ. Theory 4:2180–99 [Google Scholar]
  94. Stavins RN, Wagner AF, Wagner G. 2003. Interpreting sustainability in economic terms: dynamic efficiency plus intergenerational equity. Econ. Lett. 79:3339–43 [Google Scholar]
  95. Steffen W, Richardson K, Rockström J, Cornell SE, Fetzer I. et al. 2015. Planetary boundaries: guiding human development on a changing planet. Science 347:62231259855 [Google Scholar]
  96. Stern N. 2007. The Economics of Climate Change New York: Cambridge Univ. Press [Google Scholar]
  97. Stiglitz J. 1974. Growth with exhaustible natural resources: efficient and optimal growth paths. Rev. Econ. Stud. 41:123–37 [Google Scholar]
  98. Tahvonen O, Salo S. 1996. Nonconvexities in optimal pollution accumulation. J. Environ. Econ. Manag. 31:2160–77 [Google Scholar]
  99. Traeger CP. 2014. Why uncertainty matters: discounting under intertemporal risk aversion and ambiguity. Econ. Theory 56:3627–64 [Google Scholar]
  100. Turner RK. 1992. Speculations on weak and strong sustainability CSERGE Work. Pap. 92–26, Cent. Soc. Econ. Res. Glob. Environ., London [Google Scholar]
  101. Walker B, Pearson L, Harris M, Maler KG, Li CZ. et al. 2010. Incorporating resilience in the assessment of inclusive wealth: an example from South East Australia. Environ. Resour. Econ. 45:2183–202 [Google Scholar]
  102. Weitzman ML. 1976. On the welfare significance of national product in a dynamic economy. Q. J. Econ. 90:1156–62 [Google Scholar]
  103. Weitzman ML. 2009. On modeling and interpreting the economics of catastrophic climate change. Rev. Econ. Stat. 91:11–19 [Google Scholar]
  104. Zhang J, Smith MD. 2011. Estimation of a generalized fishery model: a two-stage approach. Rev. Econ. Stat. 93:2690–99 [Google Scholar]
  105. Zuber S, Asheim GB. 2012. Justifying social discounting: the rank-discounted utilitarian approach. J. Econ. Theory 147:41572–601 [Google Scholar]

Data & Media loading...

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error