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Sustainability and Optimality in Economic Development: Theoretical Insights and Policy Prospects

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  • Farzin, Y. Hossein

Abstract

This paper takes sustainability to be a matter of intergenerational welfare equality and examines whether an optimal development path can also be sustainable. It argues that the general 'zero-net-aggregate-investment' condition for an optimal development path to be sustainable in the sense of the maximin criterion of intergenerational justice is too demanding to be practical, especially in the context of developing countries. The maximin criterion of sustainability may be more appealing to the rich advanced industrial countries, but is too costly and ethically unreasonable for developing nations as it would act as an intergenerational 'poverty equalizer'. The paper suggests that a compromise development policy that follows the optimal growth approach but adopts certain measures to mitigate the intergenerational and intragenerational welfare inequalities may better serve these countries. Some of the principal elements of such a policy are highlighted.

Suggested Citation

  • Farzin, Y. Hossein, 2007. "Sustainability and Optimality in Economic Development: Theoretical Insights and Policy Prospects," Economic Theory and Applications Working Papers 7447, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemet:7447
    DOI: 10.22004/ag.econ.7447
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    References listed on IDEAS

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    1. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
    2. Craig Bond & Y. Farzin, 2008. "Alternative Sustainability Criteria, Externalities, and Welfare in a Simple Agroecosystem Model: A Numerical Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(3), pages 383-399, July.
    3. 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.
    4. Farzin, Y. H., 1999. "Optimal saving policy for exhaustible resource economies," Journal of Development Economics, Elsevier, vol. 58(1), pages 149-184, February.
    5. Elinor Ostrom & Harini Nagendra, 2007. "Tenure alone is not sufficient: monitoring is essential," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 8(3), pages 175-199, September.
    6. Graciela Chichilnisky, 1996. "An axiomatic approach to sustainable development," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 13(2), pages 231-257, April.
    7. 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.
    8. Y. Hossein Farzin, 2004. "Is an Exhaustible Resource Economy Sustainable?," Review of Development Economics, Wiley Blackwell, vol. 8(1), pages 33-46, February.
    9. Tjalling C. Koopmans, 1967. "Intertemporal Distribution and 'Optimal' Aggregate Economic Growth," Cowles Foundation Discussion Papers 228, Cowles Foundation for Research in Economics, Yale University.
    10. Y. Hossein Farzin, 2006. "Conditions for Sustainable Optimal Economic Development," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 518-534, August.
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    More about this item

    Keywords

    International Development;

    JEL classification:

    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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