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Weak and strong sustainability indicators and
regional environmental resources
Michael Getzner
Department of Economics, University of Klagenfurt, Klagenfurt, Austria
Keywords 1. Introduction rules on a regional level regarding water
Sustainable development, resources. If sustainability as a concept for
Groundwater, Capital Manyattempts to operationalize the ecologi- future ecological, economic and social devel-
Abstract cal concept of sustainability have been un- opment is taken seriously, only physical
Weak sustainability indicators of- dertaken (not only) by the economics constraints (taking time as an additional
ten suffer from their unrealistic profession during recent years. It seems that factor of production into account) and an
and inadequate assumption of manymainstream economists tend to focus applied precautionary principle can indeed
substitutability between natural lead to sustainability.
capital and man-made capital. their research on the assumption of substi-
Defining sustainable development tutability between man-made(manufactured)
in these terms is almost trivial; capital and natural capital (natural re-
measurement problems as well as sources, goods and services). The crucial 2. Substitutability and
methodological and sociological sustainability
issues maybeconsideredasmajor points of this discussion can be seen espe-
flaws of operationalizing weak cially in contributions by Solow (1993) on a Onthe basis of several attempts to operatio-
sustainability indicators. On the more theoretical level and by Pearce and nalize the framework as well as the indica-
other hand, strong sustainability Atkinson (1993) on an empirical level who all
indicators rely on physical mea- tors for a sustainable development (e.g.
sures. This ecological economics plead for at least partial substitutability. As WCED,1987; Daly, 1992; Weterings and
approach concedes that the Daly (1992) and others have pointed out, the Opschoor, 1992; Schmidt-Bleek, 1994; Wup-
economy is embedded in matter assumption of substitutability cannot be pertal-Institut fuÈr Umwelt, Klima und Ener-
and energy flows ultimately lim- drawn in the search for an adequate treat-
ited by solar energy input and the gie, 1995) the environmental and ecological
Earth's capability to produce re- ment of natural resources in economic and economics field is working on models to
newable resources and to cope ecological modeling and policy. define the significance and the crucial ele-
with emissions of all kinds. Draw- This article tries to clarify some questions ments of an economic development which
ing on the example of regional regarding weak and strong sustainability meets sustainability criteria. The starting
environmental resources, ground- indicators as well as sustainability rules for
water in Austria, some thoughts point of this discussion is the notation of the
on strong regional sustainability dealing with regional natural resources. ``total economic value'' (TEV) which primar-
indicators are presente In the first part of the paper, the assump- ily sets the scene. The TEV should in
tion of substitutability is discussed in var- principle comprise all relevant economic
ious aspects. Given weak sustainability values of a natural resource. The size of the
indicators, calculating the ``sustainability'' of TEVdepends not only on the decision which
a regional system (or national economy) values (or preferences) are to be counted as
becomes almost trivial. If the rate of depre- such, but also on the choice of the relevant
ciation of natural capital is at least offset by discount rate. The economic value of an asset
savings (accumulation) of man-made capital, (e.g. a machine, a stock of natural assets) is
the economy is on a sustainable development conventionally calculated by all goods and
path. Besides the missing of the social services that can be produced (or main-
``branch'' of sustainability, the depreciation- tained) by the asset now and in the future.
savings approach lacks understanding of the While with man-made capital this way of
fundamental objections against putting a calculating the economic value may be an
monetary value on natural resources (e.g. appropriate way of dealing with economic
biodiversity). Some crucial aspects in this trade-offs and internal interest rates of in-
context are discussed (e.g. lexicographic vestments, informational problems with nat-
preferences, ``consumer-vs-citizen'' ap- ural assets can hardly be overcome. The
Environmental Management proach). choice of discount rate is a scientific and
and Health The strong sustainability indicators are in empirical problem known for long: should a
1999] 170±176
10/3 [ favor of different approaches, e.g. the save- rate of time preference which might be very
#MCBUniversity Press minimum-approach. The second part of the small due to ethical considerations regarding
[ISSN 0956-6163] paper deals with practical sustainability future generations be applied, when an
[170]
Michael Getzner individual discount rate applied to consumer the existence value is given by preferences
Weak and strong goods or interest rates of alternative invest- for protection of natural resources merely
sustainability indicators and ments is probably much higher? However, because they exist (based e.g. on altruistic or
regional environmental
resources theTEVis ±intheory ±dividedbetweentwo paternalistic motives). Non-use preferences
Environmental Management crucial components (Pearce and Turner, are valued mostly by direct measurement
and Health 1990): methods such as the contingent valuation
10/3 [1999] 170±176 TEV UVNUV
1 method (CVM) founded on welfare econom-
ics. Monetary measures for non-use values
Equation (1) subdivides the total economic include compensating and equivalent com-
value (TEV) into two elements which are pensation, operationalized by means of will-
both difficult to define and to measure. The ingness-to-pay (WTP)orwillingness-to-accept
use value (UV) of a natural resource is (WTA) bids in a hypothetical contingent
defined as the economic value of the resource market. As there are no markets on which
derived by goods and services produced or non-use characteristics of natural resources
directly consumed. The use value in this are traded, the ``complementary'' good of
sense can be calculated by empirically test- these values is the consumer's sacrifice she
ing the importance of the natural resource in feels in her wallet when purchasing a per-
theproductionfunctionoffirms,aswellasin sonally satisfying quality level of the natural
the utility function of private households. A resource. This directly connects to the pro-
production function of a firm thus can be blems of substitutability and methodological
enlarged by an argument explaining natural measurement problems discussed in detail
resources inputs (e.g. Q f
L;C;R; where below. Besides informational restrictions,
theoutputofthefirmdependsnotonlyonthe fundamental uncertainties as well as pro-
input of the ``classical'' factors of production blems of democratic public choice, this
(labor L, capital C); additionally natural approach directly assumes the willingness to
resources (R) are included. The concept of exchange natural goods for money and that
use values of natural resources (UV) is not cannot be presupposed as being a priori
limited to direct economic benefits such as given with all respondents.
raw materials, consumption goods and Especially neoclassical environmental
scientific benefits. Preferences for the pro- economics focuses on the so-called weak
tection of the resource because of its eco- sustainability rule assuming total substitut-
nomic function as fundamentals for ability between natural capital and man-
recreation and sports are included as well. made capital. The weak sustainability rule
Usually cash values for productive and has its roots in capital theory (Victor, 1991).
consumptivefunctions as well as preferences The idea behind this is that mankind has a
for recreation are derived by means of certain total capital stock at its disposal. This
indirect valuation methods such as the capital stock K consists of two components:
production function approach, hedonic pri- K K K
2
N M
cing and travel cost analysis. The basic
assumption in all these approaches is that The total capital stock K is made up of K
N
the demand for a complementary good (e.g. (natural capital) and K (man-made capital,
M
value added in the pharmaceutical industry, manufacturedcapital).Thefirstpart(natural
demandforapartments,numberofvisitstoa capital) is measured by the TEV discussed
recreation area) is directly correlated to above. Man-made capital consists of all
environmental indicators like availability physical (machinery, infrastructure) and
and quality of resources for industrial pro- nonphysical (human capital) parts of the
duction, emissions in a certain neighborhood anthroposphere. An at least constant (non-
as well as beauty of and biodiversity in the decreasing) capital stock K is the indicator
recreation area. for a sustainable development. This weak
The second even more important element sustainability rule presupposes that natural
of the TEV is the non-use value (NUV) of a capital and man-made capital can be traded
naturalresourcecomprisingallvalueswhich off against each another. As long as the
are derived besides the direct (anthropo- ``worth'' of the capital, regardless of its
centric) use of a resource. Typically the composition, is non-decreasing over time,
protection of species is considered mainly as sustainability is achieved. Interestingly, em-
a non-use value due to aesthetic or ethical pirical studies in this field mainly take the
values. NUVs can be divided into the well- present capital stock as given, only consid-
known components of existence, option, and ering that these entire capital stocks remain
bequest values. While option, and bequest at least constant. There is nearly no con-
values can be seen as premiums assuring the sideration as to whether the actual capital
future existence of the resource for one's own stock may be too low to maintain (sustain)
future use or as a heritage to one's children, economic development in the future.
[171]
Michael Getzner Furthermore, assuming that a species only inequation(3)becomesalmosttrivial.Pearce
Weak and strong has one marketable service to offer, there andAtkinson(1993)haveadoptedthissimple
sustainability indicators and would not be a reason to protect that species conclusion for their work on a number of
regional environmental
resources if this particular service can be provided by national economies. Compensating for the
Environmental Management other (artificial) means. different income levels, they found that those
and Health Equation (2) is an expression of the view industrial countries (USA, Japan, Germany),
10/3 [1999] 170±176 that natural goods and services can, in which are consuming relatively as well as
principle, be supplied by man-made capital, absolutely the highest level of resources
that means that natural benefits can be (energy, raw materials etc.), are the ones
artificially produced or that forgone or lost facing a sustainable future while poor coun-
ecological benefits can be compensated by tries like Indonesia, Nigeria or Madagascar
other means. Even if the natural capital are consuming more of their capital than
depreciates, there is no danger for sustain- they add as savings to their capital[1].
ability if, at the same time, man-made capital This rather astonishing result shows on
is being produced to compensate for these one hand that weak sustainability indicators
losses. The substitutability assumption ac- like the savings rule according to (3) incor-
cording to this capital theory approach is a porate significant measurement problems,
strictly anthropocentric one, and it is ``opti- andontheotherhand,thatsuchanindicator
mistic'' insofar that, even if the technological seems to be not very helpful in discussing
standard today does not allow a perfect which economy is on a sustainable develop-
substitution between natural and man-made ment path. Besides the fact that the substi-
capital, with increasing scarcity of natural tutability assumption is at least doubtful,
resources approaching depletion, and higher there are a number of problems associated
prices, innovations will take place to com- with the monetary valuation of natural
pensate for these losses. This viewpoint is capital that is needed to compare natural
also partly incorporated in Daly's second capital and man-made assets. Section 3 con-
sustainability criterion which states that centrates on some crucial elements of mone-
non-renewable resources are allowed to be tary valuation of natural capital.
depleted when new technologies are financed
to substitute these resources at the same
time. Financing should take place by levying 3. Environmental valuation and
a kind of scarcity fee (Daly, 1992). substitutability
The depreciation of natural capital in
general can, as already mentioned, be com- 3.1 Lexicographic preferences
pensatedbyanincreaseinman-madecapital. As mentioned above, the savings rule ap-
It is not necessary to calculate the total proach discussed in section 2 is an anthro-
economic value (TEV) or the total capital (K) pocentric one with the aim to derive the
to conclude whether an economy is on a ``worth'' of an asset[2], be it natural or man-
sustainable development path. The only made, by valuing the functions provided by
thing whichhastobeknownisameasurefor this asset (valuation of assets in the ``cash
the depreciation of capital as well as the economy'' according to Price, 1993). Even if it
savings per period (usually one year). This is assumed that all functions can be valued
leads to a measurement of sustainability by fromthis viewpoint, e.g. by asking people for
the ``savings rule'' which is an expression for their willingness-to-pay for the protection of
the ``marginal sustainability'' of an economy. species because they hold altruistic motives
If the parameter Z is positive, the economy or feel moral satisfaction, the method of
tends to a higher degree of sustainability: monetary valuation presupposes that people
Z>0if S>
3 are prepared to trade natural goods for
N M money. It is this trade-off people are willing
where denotes the periodical depreciation to accept. But this approach leaves out
N
(exploitation) of natural capital, while is preferences which cannot be stated by re-
M
the depreciation of man-made capital. S spondents in a monetary form. This is
denotes all savings of the economy (both in especially the case when respondents either
natural and man-made capital). If total sav- are not able to make adequate deliberations
ings are higher than total depreciation, the onthesubject, or when respondents refuse to
economy is on a sustainable development value natural goods in monetary terms.
path because there are net savings which Refusing to answer a valuation question can
increase the total capital stock needed to in many cases be explained by respondents'
produce goods and services (benefits for point of view that there are moral (ethical)
humans). In this sense, abstracting from obligations that cannot be valued because
rather difficult problems of measuring the there is only ``right'' or ``wrong''. In this case,
depreciation of natural capital, calculating Z economists have spoken about lexicographic
[172]
Michael Getzner preferences (e.g. Hanley et. al., 1995; Spash informational constraints facing individual
Weak and strong and Hanley, 1995). These are preferences perceptions of natural values and future
sustainability indicators and whereatrade-off between the good for which events. Theory concedes that ± ultimately ±
regional environmental
resources these preferences are held and other goods is in every market decision, risk and uncer-
Environmental Management denied on (probably) ethical grounds. Where tainty are captured because fully informed
and Health natural goods are concerned, many respon- agents incorporated the future in today's
10/3 [1999] 170±176 dents (up to one quarter) hold preferences of behavior. Therearemanyproblemswiththis
that kind. This can be a serious flaw for the assumption, e.g. it cannot be presupposed
valuation approach which is founded on the thateconomicagentsvaluefutureeventsbya
neoclassical theory of exchange. discount rate adequate in a societal perspec-
Sustainability in its ``weak'' form is based tive. ``Adequate'' in this context means that a
on this willingness to exchange. Therefore, distinction should be made between discount
preferences in a lexicographic form, where rates for trading off present versus future
there might be only one ``right'' or ``wrong'' consumption and valuing the welfare of
development decision, which can be the case future generations. Furthermore, these dis-
with biodiversity or landscape protection, do count rates may significantly differ from the
not fit into the model of substitutability of rates at which ecological systems regenerate,
natural capital and man-made capital not to speak of geological time scales.
(money). Strong sustainability indicators, only in-
directly based on individual perceptions of
3.2 Consumer vs citizen future events[3], try to focus on longer time
Anadditional argument against ``weak'' sus- scales than weak indicators. Besides this
tainability indicators may be seen in the time scale problem, informational con-
divergence of socio-economic roles of eco- straints of individuals as well as risk neutral
nomic agents as ``consumers'' and ``citizens''. or risk loving individual behavior contrary
There is a lively debate in ecological eco- to risk-averse social behavior should lead to
nomics and surrounding fields (e.g. institu- more stringent strong sustainability frame-
tional economics) concerning to what extent works. Gowdy and Olson (1994) ± making the
the individual choice may differ, depending connection between individual valuations
on the ``viewpoint'' or ``role''. Sagoff (1988) and the knowledge science has accumu-
started this discussion by stating that indi- lated ± write: ``Contingent valuations, even
viduals are not only consumers acting ac- in theory, are no better than the information
cording to their personal sacrifice when available to the most knowledgeable people.
valuing natural goods. The monetary valua- Knowledgeoftheintricaciesoftherainforest
tion operationalizing the ``weak'' sustain- environment [...] is almost nonexistent even
ability approach is based on an individual among biologists specializing in that area''
utility function where the willingness to pay (p. 169). And concluding: ``What sense does it
depends on the different ``utility'' levels make to set environmental policy on the
obtained as consumer. By contrast, espe- basis of opinion surveys of an uninformed
cially when dealing with public goods, eco- public?'' (p. 170). It cannot be assumed that
nomic agents do not only maximize their economic agents in their individual market
individual utility but act as citizens con- environment behave as if they follow the
cerned for the better of society. precautionary principle of environmental
Taking this divergence of roles into ac- policy.
count, it becomes clear that a weak sustain-
ability rule, based on market prices and
consumer choices lacks the preferences of 4. Strong sustainability indicators
economic agents which they hold as citizens. for regional water resources in
With the ``weak'' criteria some preferences Austria
maynot be included, and measuring only
market values instead of values held by the Onthebasis of the discussion of the weak
``civil society'' may pose serious dangers to a sustainability rule and its foundations, the
sustainable development. The latter values ground for approaching the concept of a
mayonly be captured by ``strong sustain- strong sustainability rule is prepared. To sum
ability'' criteria especially due to their in- up, the main problems of the weak sustain-
commensurability. ability rule are the lack of substitutability
between natural and man-made capital, and
3.3 Time, information and the major flaws of the individualistic monetary
precautionary principle valuationofnaturalgoodsingeneral.Itcanbe
Before discussing sustainability for a regio- concluded that the weak sustainability rule
nal natural resources in more detail, a final has in principle a different world view
point should be made regarding the regardingthe``embeddedness''oftheeconomy
[173]
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