Academic journal article Journal of Emerging Trends in Economics and Management Sciences

New Trends in Measuring Sustainability with Implications for Developing Economies

Academic journal article Journal of Emerging Trends in Economics and Management Sciences

New Trends in Measuring Sustainability with Implications for Developing Economies

Article excerpt

Abstract

Measuring sustainability is a permanent theoretical and empirical argument in the environment economics literature. The controversy in interpreting sustainable development has allowed alternative methods for measuring sustainability. In general, the current paper reviews the neoclassical approach in measuring sustainability; it presents an in-depth analysis of the main available measurements, their shortcomings and their contributions to the literature... In specific, the paper introduces a comprehensive review of the World Bank concept for measuring sustainability based on genuine savings concept. Furthermore, the paper provides a per capita analysis of the World Bank concept in selected sets of developing economies. The calculation of the per capita measure allows a further contribution in the analysis as well as enriches the policy implications for developing economies. Although both the Pearce & Atkinson concept and the World Bank concept follow the neoclassical assumptions in measuring sustainability, yet it is important to highlight the main difference between the two concepts. Thus, the paper highlights the limitations in the World Bank concept and suggests recommendations to overcome these shortcomings. However, it is of a great importance to take the proposition of capital transfer with much concern and carefully recognize its limitations.

Keywords: sustainability, sustainable development, genuine savings, human capital, man- made capital,

INTRODUCTION

In 1987, the World Commission on Environment Development Report, known as the Brundtland Report defined sustainable development as "meeting the needs of the present generation without compromising the ability of future generations to meet their own needs" (WCED, 1987). Although this definition is comprehensive, it does not reflect a conclusive measurement of sustainable development; instead it opens a wide range of interpretations. In order to explore this controversy, a set of measurements for sustainability is used in the environment economics literature. This paper reviews the current controversies and limitations in measuring sustainability. The paper first discusses several measurements for sustainability in Section One. Section Two focuses on the World Bank sustainability indicator; it discusses its main theoretical assumptions-based on the neoclassical approach. Section Three provide the WB calculations for genuine savings in selected developing economies. Section four highlights the shortcomings in WB concept; and finally Section Five presents recommendations to overcome the shortcomings in measuring sustainability.

Recent Developments in Sustainability Measurements

All interested parties include economists, ecologists and philosophers have different understandings for sustainability concept. According to Pearce & Bateman (1993), sustainable development requires creating the welfare of current generations without damaging the wellbeing of future generations. This means that sustainability requires a sustainable flow of income. Thus, measuring sustainability should include the wellbeing as well as the sustainability of the development process rather than merely calculating economic growth (Costantini & Martini, 2006).

Pearce & Atkinson (1992; 1993) introduced a sustainability measurement that succeeded in capturing much attention and credibility in the literature. Basically, their measurement states that development and welfare are achieved through "the collective contributions of all types of capital". Its basic assumption is that "the level of the overall capital stock should be non-decreasing". This means that current generation should leave an amount of capital stock equal to what they have now to future generations. This involves an equal transfer of capital stock as a condition for sustainable development. By fulfilling this condition, future generations get compensation for future damage through the transfer of capital legacy (Pearce & Bateman, 1993). …

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