The International Yearbook of Environmental and Resource Economics 2004/2005

The International Yearbook of Environmental and Resource Economics 2004/2005

A Survey of Current Issues

New Horizons in Environmental Economics series

Edited by Tom Tietenberg and Henk Folmer

This major annual publication provides a state-of-the-art survey of contemporary research on environmental and resource economics by some of the leading experts in the field.

Chapter 4: Indicators of sustainability

Eric Neumayer

Subjects: economics and finance, environmental economics, environment, environmental economics

Extract

Eric Neumayer* 1. INTRODUCTION If a political or geographical entity such as a nation-state, a region or a city is committed to sustainable development, then measuring sustainability becomes very important. Only with the help of such measurement will it be able to assess whether and if so which policy measures are necessary to achieve sustainability. I will mainly concentrate on the nation-state level here and inquire how one can measure whether the economy of a country is sustainable and what such measurement tells us. As will be seen, there are many indicators aspiring to answer this question and they come to starkly differing conclusions. For example, some indicators tell us that most countries, particularly the developed ones, have no apparent problem with sustainability, whereas others suggest that the economies of many countries, and the developed ones in particular, are clearly unsustainable. Part of the reason why existing indicators come to such differing conclusions is that they differ in their understanding of sustainability and thus differ in what they measure. To start with, on a very fundamental level, most indicators focus exclusively on intergenerational equity, that is equity between generations. However, at least one of the indicators I look at, namely the index of sustainable economic welfare (ISEW), explicitly tries to combine intergenerational equity with intragenerational equity, that is, equity within the current generation. Furthermore, sustainability, even where it refers exclusively to intergenerational equity, comes in two main forms, namely weak sustainability (WS) and strong sustainability (SS). I define WS as...

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