Economics and the governance of sustainable development. Governing Sustainability: essays in honour of Tim O’Riordan
In this chapter we assess the role of economics in governance for sustainable development. Firstly, we ask how has the‘mainstream’ environmental and resource economics paradigm helped us understand the nature of sustainable development? We explain the context in which environmental and resource economics developed and the main propositions made during its formative years. These help us to understand the paradigm’s approach to sustainable development or sustainability (we do not distinguish between these two terms, although some do). Taken to the limits of formalism, it culminates in the social planner’s desire to optimise human welfare over all time and the drive to place monetary values on, and aggregate, all forms of wealth, including natural assets. This chapter then outlines the strengths and weaknesses of this approach by comparing it with an alternative set of approaches that has come to be known as ecological economics.
Our second question is how can economics inform governance systems for sustainable development? Thus the final section of the chapter reflects on the contributions that economics can make to the policy process, using two high-profile motivating examples: the Copenhagen Consensus, devised by the ‘skeptical environmentalist’ Bjørn Lomborg (Lomborg 2001), and the Stern Review on the Economics of Climate Change (Stern, 2007). Although economic analysis has much to offer (for example in the design of policy instruments for delivering sustainable development), we caution firmly against a reliance on formal modelling to prescribe a single, optimal path of policy. Instead we must draw upon a broader range of evidence, in which such formal approaches are nevertheless useful. We emphasise the need for economic research on sustainable development to take serious and explicit account of its ethical implications, of uncertainty about the consequences of depleting the natural environment, and of the possibly essential and non-substitutable role of the natural environment in sustainable development.
Dietz, S., Hepburn, C., and Stern, N. Economics, ethics and climate change. Arguments for a Better World: essays in honour of Amartya Sen (Volume 2: society, institutions and development) [Kaushik Basu and Ravi Kanbur (eds.)], 2009. Oxford University Press, Oxford.