The Economics of Sustainable Development

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The economics of sustainable development. Edited by Sisay ASEFA. Kalamazoo, MI, W.E. Upjohn Institute for Employment Research, 2005. vii + 191 pp. Tables, figures, index. ISBN 0-88099-320-0.

Sustainable development analysis differs from the standard economics of growth and development by incorporating natural resources as a form of "natural capital", defined as the value of the existing stock of natural resources (e.g. forests, fisheries, water, mineral deposits and the general environment). In this book, selected dimensions of sustainability are explored on the understanding that such natural capital provides goods and services to people, just as do financial capital, manufactured capital and human capital (created by investment in education and health). And since the depletion of natural capital can be compensated for, in part, by investments in manufactured and human capital, an economy is understood to become unsustainable if it fails to reverse the depreciation of these three forms of capital. However, limited substitutability between natural and other forms of capital still makes it crucial to preserve the various forms of capital for future generations.

The environmental problems of developing countries are primarily driven by poverty, while those of wealthier countries are typically driven by affluence and overconsumption. Sustainability is thus a challenge that confronts all societies, albeit in different ways and for different reasons. Yet, as one of the contributors to this book points out, sustainable development is especially important for poor societies because they tend to be more heavily dependent upon natural resources. …