Confronting Environmental Issues
Edited by Richard P.F. Holt, Steven Pressman and Clive L. Spash
Chapter 14: Optimize versus Satisfice: Two Approaches to an Investment Policy in Sustainable Development
1 Jerry Courvisanos INTRODUCTION There are two broad approaches to sustainable development. The first, adopted by both neoclassical and ecological economics, focuses on optimality. The second is the satisficing approach, which is based on Post Keynesian and institutionalist principles. This chapter argues that there is a fundamental weakness in the optimality approach, and that this weakness undermines any effective investment policy towards sustainable development. Because Post Keynesian economists take uncertainty and cumulative causation into account, they are in a better position to deal with sustainable development and develop appropriate investment policy. The satisficing approach thus provides an opportunity for Post Keynesian economists to make a major contribution in the area of sustainable development (Winnett, 2003). From the neoclassical perspective, environmental concerns are resolved through optimal cost–benefit algorithms. Ecological economics sees the economy as a subset of the global ecosystem, requiring an optimal scale of resource use. From this vantage point, optimality is the only policy approach to resolving environmental issues that has generally been considered. However, these optimality strategies fail to address two problems identified by Post Keynesian economists: fundamental instability in economic activity (Kalecki, 1971), and inappropriate use of technology (Lowe, 1976).2 These failures lead to suboptimal solutions. A superior alternative to the optimality approach comes out of a dynamic Post Keynesian non-optimal (satisficing) framework for sustainable development based on the work of Adolph Lowe and Michał Kalecki. 279 280 Post Keynesian and ecological economics DEFINING SUSTAINABLE DEVELOPMENT Sustainable development became popular in 1987 after the publication...
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