Exploring the Limits of Two Opposing Paradigms, Third Edition
Chapter 5: Measuring Weak Sustainability
In this chapter, I shall discuss whether weak sustainability can be measured in practice. Section 5.1.1 derives genuine savings (GS), a theoretically correct measure of WS, from a dynamic optimisation or optimal growth model. The model is for a closed economy and the following section discusses the necessary amendments for an open economy context. A number of problems in measuring WS in practice are put forward. The examination then turns to the World Bank's efforts at computing GS figures for most countries in the world. I argue that the dismal conclusions of the World Bank (2009a) about the unsustainability of developing countries crucially depend on its method for resource accounting. These conclusions are largely reversed if another method, namely the EI Serafy method, is used for computing natural capital depreciation due to resource depletion. Section 5.2 discusses the Index of Sustainable Econmic Welfare (lSEW), also known under the name Genuine Progress Indicator (GPI), as an alternative indicator of WS. I show that the results generated by the ISEW and GPI methodology depend on problematic assumptions and methodological errors. In sensitivity analyses it is shown that the dismal results of ISEW studies about decreasing 'sustainable economic welfare' in developed countries in the WS sense fail to uphold if more reasonable assumptions are taken and the methodological errors are corrected. Section 5.3 concludes. 5.1 GENUINE SAVINGS (GS) The purpose of this section is to show that genuine savings (GS) can be used as an indicator of WS. The term 'genuine' was introduced...
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