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It is now recognized that a healthy environment is It is now recognized that a healthy environment is essential to sustainable development and a healthy economy. This paper attempts to analyze the concepts of sustainable development, sustainable resource use and sustainable growth in terms of conventional economic analysis, to examine why free market forces may not achieve sustainability, and to explain how policy interventions may help or hinder the achievement of sustainability.

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Evaluating Projects and Assessing Sustainable Development in Imperfect Economies | SpringerLink

All language versions and volumes across World Bank Repositories. Ludwig and W. Collins, S. Dasgupta, P. Oxford: Clarendon Press. Oxford: Oxford University Press. Pleskovic and N. Stern, eds.

Washington, DC: World Bank, forthcoming, Heal , Economic Theory and Exhaustible Resources. Cambridge: Cambridge University Press. Marglin and A. Sen , Guidelines for Project Evaluation. New York: United Nations. El Serafy, S. Ahmad, S. El Serafy and E. Lutz, eds. Washington, DC: World Bank. Hahn, F.

Hamilton, K. Harsanyi, J. Hartwick, J. Lutz, ed. Hicks, J. Johnson, D. Kurz, M. Levhari, D. Lipset, S. Little, I.

Project Initiation and Sustainability Principles

Regarding the inventories, however, we call them Kmi , their components are available to be transformed by Kms , in association with other agents of production, into products. But once a portion of the inventories is used, it ceases to exist as such; it becomes incorporated into products and into the waste steam. An implication of this decomposition of Km into Kms and Kmi is that there are usually different substitutabilities between and within these two categories. A similar decomposition, particularly relevant for our discussion, can be made regarding Kn.

Natural capital comprises a very important category of funds of services of nature, Kns , usually overlooked by the weak sustainability approach; and a category of stocks of natural resources, Kni , available to be extracted for use in production. If Kn is assumed to be mostly of the latter kind, however, it is not difficult to expect considerable substitutabilities between Km and the depletable elements of natural capital but there surely are some complementarities between the two categories. And technical change will usually facilitate such substitution. Regarding Kns , the funds of services from nature, they provide to the human society important services, not only for production and consumption, but also in safeguarding life. They include, for instance, functions of nature such as the regulation of climate, the maintenance of biogeochemical cycles fundamental for life; or the resilience of ecosystems in face of human impacts.

But although fundamental, many of the services of Kns are free and it is very difficult to attach property rights to most of them, and estimate meaningful efficiency prices for the services they provide Ayres, ; and some cannot be replaced once destroyed. The latter point should be stressed: it is true that Kms and Kns are both funds of services, but machines can usually be rebuilt; this is not the case with certain elements of Kns.

A casual posture regarding the fund of services of natural capital can be expected when sustainability is evaluated based on an epistemology that is blind to the properties of natural systems. These services are then regarded as stemming from a submissive system which can, to a large degree, be impacted by the economy with no major consequences. It is agreed that the economy can mishandle nature, but the ensuing effects are only seen as important if they adversely impinge on social welfare.

Moreover, events generating these effects tend to be considered amenable to fairly easy rectification, through the imposition of corrective charges. This is not a suitable approach to the analysis of the interactions between our economy and vital natural systems. An alternative would be to recognize at the outset, that sustainable development is development that lasts, and treat development as an evolutionary process. Unsustainable development can, however, result in changes, some potentially catastrophical, in evolutionary parameters.

There are instances of human induced catastrophes which altered evolutionary parameters. Homo sapiens has " shifted evolution on this planet into a new gear and proved ecologically catastrophic for many older species " Boulding, , pp. This approach can be used to bring into the analysis of sustainability the funds of services from nature.

Natural systems are treated, not as benign, self restoring space, but as a set of dynamic, interdependent and vulnerable systems. Stability can be focused assuming our globe as an all encompassing natural system; for Ayres, 18 for instance, our planet is a dynamic, self organizing system, operating through a series of physical and chemical processes, thanks to which it " But " However, our economy has been functioning largely outside this cycling mechanism. The question, then, is: until when will the global system endure increasing human aggression? For the weak sustainability approach, the answer is forever, but for the strong sustainability approach this is far from being the case.

We should, therefore, explicitly focus the effects of anthropogenic interferences on environmental functions, elements of Kns , which are vital for the stability of the global system. A strategy for sustainability would involve the protection of the resilience of systems on which humanity depends, with its implementation monitored with the aid of pertinent sustainability indicators, built based on a methodology that explicitly considers the destabilizing human impacts on natural systems. Discussing substitutability, some neoclassical scholars recognize human threats to global stability.

For Toman et al. Another instance is, to some extent, in the analysis by Arrow et al. The tone and the conclusions of the paper, authored by a group of prominent economists and environmentalists, are similar to those of the World Bank, b report. However, the final sections of the paper discuss elements of instability and unsustainability that cannot be captured by the genuine saving the paper labels it genuine investment methodology.

Thresholds and catastrophe risks are acknowledged but the overall message is that, since ecological economics has not yet produced satisfactory tools to deal with them Arrow et al.


In attempting to develop an alternative approach, some totally reject such methodologies. For Wackernagel , pp. But the author advocates the use of another unidimensional sustainability indicator: the ecological footprint, the total amount of land necessary for a city, a region, a country to function Wackernagel and Rees, Common and Perrings argue, however, that modifications in a general equilibrium model can be made to take into account threshold elements; to this extent they combined concepts of economics and of ecology in a sustainability model in which the 'efficient' allocation of resources is constrained by threats to the stability of the global system.

We present a sketch of their model. For the authors the most pressing sustainability problems arise from feedbacks between the economy and biophysical systems involving threats of irreversible changes in their organizational structure.

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They emphasize the interdependence, brought in by the constraint set, between the economy and the larger system in which it is embedded. Their model also has a social welfare function. Welfare is derived both from the income resulting from the exploitation of the resource base and, importantly, from the benefits obtained by the present generation " from the state of the system it bequeaths to future generations " p. Holling sustainability concept. Holling sustainability is linked to the resilience of the biophysical system, that is, to its capacity to maintain its functional stability in face of disturbances, especially those resulting from impacts of economic decisions.

They stress the need to search for a resource allocation that will not threaten the stability of key components of the global system. Important in this is the role of ecological health on the preferences of the present generation, affecting their legacy to the future. Since efficiency prices alone do not assure sustainability, single dimension indicators based on them can be misleading. A more consistent evaluation requires that we consider the links between the economy and the global system impacting on the resilience of the larger system.

The WBRT efforts to estimate sustainability indicators deserve praise and wishes for continued improvement.