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Discounting and Sustainability

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  • Quiggin, John C.

Abstract

The discounting of future benefits has long been one of the most controversial, and in many ways, unsatisfactory, aspects of benefit -cost analysis. This concern has been heightened by the rise of the environmental movement and, particularly by the debate over sustainable development. The sustainability approach is presented as an alternative to the standard benefit-cost analysis approach to the question of inter-generational equity. Sustainability is in fashion, and, as with all fashionable terms, it has been used in many ways and in support of many different policy agendas. A summary and critique of the literature is given by Ule (1991). I shall interpret sustainability very broadly to encompass two main concerns: (i) The interests of future generations should be given equal weight with our own in making decisions affecting the long term future; (ii) It should not be assumed that capital (that is, technology embodied in produced goods) can be substituted indefinitely to compensate for land (taken broadly to include all the contributions of the natural environment to human welfare, and agricultural production in particular). In this paper, the relationship between the idea of sustainability and the older literature on optimal growth is examined and implications for discounting, income distribution and the treatment of uncertainty are explored.

Suggested Citation

  • Quiggin, John C., 1992. "Discounting and Sustainability," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 60(02), pages 1-4, August.
  • Handle: RePEc:ags:remaae:10340
    DOI: 10.22004/ag.econ.10340
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    References listed on IDEAS

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    1. A. Markandya & D. W. Pearce, 1998. "Environmental sustainability and cost–benefit analysis," Chapters, in: The Economics of Environment and Development, chapter 4, pages 54-64, Edward Elgar Publishing.
    2. R. M. Solow, 1974. "Intergenerational Equity and Exhaustible Resources," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(5), pages 29-45.
    3. John M. Hartwick, 1978. "Substitution Among Exhaustible Resources and Intergenerational Equity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(2), pages 347-354.
    4. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-974, December.
    5. Lele, Sharachchandra M., 1991. "Sustainable development: A critical review," World Development, Elsevier, vol. 19(6), pages 607-621, June.
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    1. Ullah, Mujib & Cacho, Oscar J., 2001. "Property Rights and Sustainable Land use on a Salinity-affected Catchment," 2001 Conference (45th), January 23-25, 2001, Adelaide, Australia 125985, Australian Agricultural and Resource Economics Society.

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