A Sketch of Environmental Macroeconomics

In Sect. 10.1, we examine how the conclusions of neoclassical growth theory that were explained before in Chap. 9 are altered if a non-renewable natural factor of production is introduced. The neoclassical assumption of unlimited growth possibilities has been questioned by, among others, the Club of Rome, by hinting at the exhaustability of natural productive stocks. The neoclassical rejection of the assumption of natural limits to growth rests on the possibility to substitute for declining natural productive stocks by investing in man-made capital in order to ensure intergenerational justice. The latter is interpreted as constant consumption of goods over time. The idea of intergenerational justice forms the base for the concept of sustainable development, which is, controversially, discussed. Technological progress might relax the dependence on natural production factors but hast o be analysed in a differentiated manner. ► Section 10.2 reports on attempts to incorporate natural resources into national acounting procedures more completely. Both the flow indices and the stock indices of the SNA have been criticized for neglecting important contributions of the natural environment. As a response to this critique, the United Nations’ System of Integrated Environmental and Economic Accounting (SEEA) is presented. Both the SEEA and various other approaches of integrating the natural environment into national accounting are assessed with regard to their ability to measure progress toward sustainable development.