Weak versus Strong Sustainability
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Weak versus Strong Sustainability

Exploring the Limits of Two Opposing Paradigms, Third Edition

Eric Neumayer

This insightful book explores the limits of the two opposing paradigms of sustainability in an accessible way. It examines the availability of natural resources for the production of consumption goods and services, and the environmental consequences of economic growth. The critical forms of natural capital in need of preservation given risk, uncertainty and ignorance about the future are also examined. The author provides a critical discussion of measures of sustainability. As indicators of weak sustainability, he analyses Genuine Savings and the Index of Sustainable Economic Welfare, also known as the Genuine Progress Indicator. Indicators of strong sustainability covered include ecological footprints, material flows, sustainability gaps and other measures, which combine the setting of environmental standards with monetary valuation.
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Appendix 1: How Present-value Maximisation Can Lead to Extinction

Eric Neumayer


Appendix 1 How Present-value Maximisation Can Lead to Extillction Here is an example that shows how applying present-value maximisation with a constant discount rate as decision criterion can lead to utmost unsustainability. Imagine that there are two utility paths available. The flrst one provides an inflnite stream of utility at a constant level VI' The second one provides a stream of utility at a constant level V 2• Assume that V 2 is higher than VI (V2 > VI), but that the second path provides higher utility V 2 only for a fmite time T (T < (0) and utility falls to zero for ever after time T. Imagine that there is a social planner who has to choose either of the two paths. The presentvalue of each utility path, using a constant discount rater, is p~ = fVle- dt, o co rt T P V2 = f v 2 e-rt dt o If the social planner applies present-value maximisation as the decision criterion, he or she will prefer path two to path one if and only if T o f V 2 e -rt dt co > fV r e -rt dt 0 V2 _rt]T > VI [--e r 0 r V 2 -VI e-rT <--=--....:... V2 196 Appendix 1 197 How is this result to be interpreted? Assume V 2 to be 10 per cent higher than VI and T to be 50 years. I Then r has to be just about 4.8 per cent per annum in order to choose utility...

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