Neoclassical Approach To Sustainable Development Essay

This article offers an overview of economic approaches to the concept of sustainable development. Two different economic approaches to sustainability are contrasted: neoclassical environmental economics and ecological economics. Key issues which are identified include weak versus strong sustainability, commensurability versus incommensurability, and ethical neutrality versus acceptance of different values. The Concept of Sustainable Development Traditional neoclassical economics analyses the process of price formation by considering the economy as a closed system. While classical economists like Malthus, Ricardo, Mill, and Marx saw economic activity as bounded by the environment, neoclassical theory essentially ignored this reality until the

Since it is difficult to conceive of Western-style economic consumption goals being realized on a planetary scale without massive resource depletion and pollution, this view necessarily entails issues of distributional equity. Distribution in this context refers not only to distribution of income and consumption levels, but also to the distribution of environmental burdens such as polluted air and water or toxic waste. Neoclassical Environmental Economics Environmental economics focuses on: (1) The problem of environmental externalities; Reprinted with permission from Island Press. © 2001 2 (2) The efficient management and intergenerational allocation of natural resources. Neoclassical economists take their inspiration from Newtonian mechanics, generally believing that economics can be value-neutral, objective, and scientific. Rational decisions regarding "optimal" solutions in neoclassical environmental economics depend on calculations in monetary terms. Natural resources are not seen as imposing binding constraints on economic activity, since technological progress and reproducible human-made capital can substitute for natural

There is no unique or optimal development path; both cultural and ecological diversity are of fundamental importance, and their coevolution moves in unpredictable ways. Economy-Environment Interaction Reprinted with permission from Island Press. © 2001 3 Taking the broader ecological economics perspective, we must consider the relationship between three systems: • The economic system including production, exchange, and consumption; • The human system including biological life processes, culture, aesthetics, and morality; • The natural system, within which both the economic and human systems are included. The expansion of the economic subsystem is limited by the size of the global ecosystem. The idea that there are limits to the scale of the economic systems leads to a concept of strong sustainability, according to which some elements of natural capital are considered critical, and not readily substitutable by human-made capital. These critical elements of natural capital must be sustained over time in physical, not economic, terms.