Sustainability from an Economic Perspective

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In 1987 the World Commission on Environment and Development tried to resolve the problem that lies in contradictions between environment and economical goals; the result was formed in definition of sustainable development: ‘Sustainable development is development which meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Smith & Rees 1998, p. 15). Since that long time ago 1987, there have been a lot of researches in this field, and three essential aspects of sustainable development have been defined (Kronenberg & Bergier 2012, p. 24). At first, there is economic – a sustainable system must be able to produce goods and services on a permanent basis, to maintain appropriate levels of debt (government as well as external one), and to avoid significant disbalance in different sectors (that can damage agricultural or industrial production). Second one is environmental aspect – a sustainable system must maintain a stable resource base, avoid over-exploitation of renewable resources, and exhausting nonrenewable resources only if adequate substitutes exist. The last aspect is social one - a sustainable system must characterized by fair distribution and opportunity for everybody, provision of social services (like health, education, etc.) on the adequate level, gender equity, and political accountability and participation (Hofkes 1996, p. 342).These three aspects of sustainability make the originally simple definition of economic development more complicated or more precise, in other words.

Sustainability from an economic perspective

Despite on these complications, three principles, outlined above have resonance at a common-sense level. According to viewpoint of neo-classical economic theory, sustainability can be defined in terms of the maximization of welfare over time (Sabau 2010, p. 1197). Simplifying further, maximization of welfare is identified with the maximization of utility got from consumption. Although it may be criticized as oversimplification, this approach includes many important elements of human welfare (such as food, clothing, housing, transportation, health and education services, etc.) and it also has the advantage in analytical term; thus, the problem of measuring is reduced to a single-dimensional indicator (Peng, Guosheng & Yancai 2011, p. 923). So, it will be fare to say that the economic perspective of sustainability focuses on the trade off of current consumption for future consumption. So, key to sustainability is whether created and natural capitals are substitute or complementary goods. Many economists believe in idea that we can maintain current level of consumption, while needs of future generations will be taken care by technological innovations (Onishi 2001, p. 227). However other economists suggest that created capital and natural capital are complementary goods; on this perspective, as more created capital we consume, as more natural capital we also will have to consume. In my mind, the paradigm of economic sustainability based on a pretty simple suggestion: different kinds of capital, by which economic production is possible, must be saved on a previous pace or increased. They are included following one: manufactured capital, natural capital, human capital, and social capital (Kronenberg & Bergier 2012, p.25). Among these kinds of capital some interchangeability may be possible, but in long-running terms they are complementary, so the maintenance of all four is essential.

Weak & Strong sustainability

From the perspective of substitution in production, economic sustainability can be determined as weak or strong. Many mainstream neoclassical economists held the weak sustainability position. It stated that the overall welfare of society should not decline overtime (Dietz & Neumayer 2007, p. 620). In other words, it can be called: ‘perfect substitutability paradigm’; which can be understand as approach, when...
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