My right vs. a future child's

March 1, 2002

David Pearce asks if we need ethical reforms to ensure sustainability.

From an ecological standpoint, the history of economic and social development can be thought of as the exploitation of one form of capital asset - natural resources - with the proceeds of the exploitation being reinvested in other forms of capital - machines, roads and agricultural land - that generate human wellbeing. It is no accident, then, that the absolute level of worldwide deforestation over past centuries is almost exactly equal to the absolute growth in agricultural cropland area. Indeed, for some economic historians, this process of substitution of different forms of capital is the driving force of industrial and agricultural revolutions.

This sweeping view of history gives rise to a strong sense of unease about the future. However ingenious humans may be, some natural resources cannot for ever be substituted without enormous cost in terms of future levels of human wellbeing. Global warming would be one topical example. Another, loss of biological diversity, is probably far more important. The constraining resources are probably not oil or bauxite, but the waste-receiving capacities of natural environments and the diversity of life forms. The unease is magnified when we see that not only have humans exploited essentially finite resources but the potentially infinitely recurring renewable resources as well. Probably 60 per cent, maybe more, of the world's fisheries are unsustainably exploited. Tropical deforestation proceeds apace. It is simple to summarise the resulting concern. What constituted the basis of development in the past may no longer be viable; copying past development is unsustainable.

What then are the prospects for a sustainable form of development, one in which future generations will be, in some sense to be defined, better off than we are? It is a tribute to environmental economists that we now have a far better idea of the answer to this question than we did ten or 15 years ago. Building on his classic magnum opus, An Inquiry into Well-Being and Destitution (1993), Partha Dasgupta has joined this rethink about the sustainability of development in an intellectually rich, thought-provoking and occasionally metaphysical work. His new book probes many issues beyond those that might be anticipated from the title and confirms his position as one of the most exciting economic thinkers today. One word of warning: Dasgupta wants his book to be read within academic realms but also outside them, by "general citizens". But, despite the elegant prose in which much of the book is written, large parts of it are more than demanding, mathematically and in terms of logic. I doubt it will reach beyond academics, but that does not make it any the less a worthwhile venture.

The unifying theme is sustainable development, or the sustained increase in per capita human wellbeing over some arbitrary but long-time horizon. Just what is meant by wellbeing occupies about a third of the book. Dasgupta is clear that it is a pluralistic concept: freedom of expression and civil rights are constituents, as are income per head, literacy and health. To give some empirical content to this pluralism, he produces indicators of wellbeing for the poorest countries of the world. The temptation to reduce multiple indicators to single indices gets some support by noting that individual indicators are often correlated. But others are not. Adult literacy and the traditional notion of gross national product per head are not clearly linked. Nonetheless, democracy is shown to be good for economic development, not something that comes later as a "luxury good" - a finding in common with the burgeoning re-emergent literature that seeks to explain comparative economic performance.

Projecting all this to the future raises different problems. It is fashionable to argue that future generations have "rights" to development, placing an obligation on us to treat them as equals and to ensure they are at least no worse off than we are. Dasgupta carefully discusses these notions of rights. First, assuming talk of rights is itself justified, rights cannot be absolute. My "right" to a clean environment incurs a cost, which means a social sacrifice of something else, say expenditure on a hospital. That forfeit could infringe someone else's rights (even my own) to good healthcare. The argument holds for intergenerational concerns as well: serving some notion of future rights could easily offend rights of the current generation. Second, we live in a world of actual and potential people, people who exist and those who are yet to exist. Are both groups entitled to equal treatment? In a refreshing analysis, Dasgupta is clear that they are not: actual lives have superior claims to potential lives.

Insofar as there is a commitment to sustainable development, what matters is that the next generation has the same productive capacity as we have. (If they make a mess of it, that is their problem. We will have provided the capital base.) That capacity consists of all the capital assets added together - environmental, social and manmade, including human knowledge and skills. Dasgupta laments the fact that development economists still have not adopted the environmental economists' approach to sustainability, but it seems fair to say that the environmental approach is increasingly winning the argument.

Can this total of capital assets, or wealth, be measured? Dasgupta borrows from earlier work by Kirk Hamilton at the World Bank, and from this reviewer, in opting for a measure of "genuine investment" (or genuine savings). The intuition is simple. Investment is what creates capital. Depreciation of capital measures reductions in the existing capital stock. So, unless investment in all forms of capital, not just conventional manmade capital, exceeds depreciation, the capital stock cannot expand. Since population growth is typically positive, the requirement to expand wealth per capita turns out to be more demanding still. It is not enough to expand wealth, it has to be expanded faster than population growth. Crude though the data are, many countries fail this test of increasing per capita wealth: they are not sustainable. Effectively, what they are doing is mining the asset base without replacing it - akin to selling off the family silver. Moreover, the resulting indicators contrast starkly with the traditional ones, such as GNP per capita, or the fashionable but deeply flawed "human development index" produced annually by the United Nations Development Programme.

For environmental economists, the discussion of wealth indicators will be familiar territory, and Dasgupta touches on only some of the often-acrimonious debate in the literature. For example, to what extent does the wealth concept continue to ignore the sense of unease about substitution between assets? After all, wealth can grow in the aggregate at the expense of any one of the constituent elements. Dasgupta raises the issue in the context of biodiversity, but his answers are somewhat ambiguous compared with the authoritative statements that characterise the rest of the book. If biodiversity is sacrosanct, what would this imply for a sustainable development policy? In real terms, it would surely mean attempting to do the impossible by conserving what we have in a context where population grows by at least half again and more probably doubles. If biodiversity is substitutable at the margin, what is to be said about the "rivets" theory, whereby repeated marginal substitutions (taking the rivets out of the aircraft) eventually lead to collapse? One answer is that such repeated substitutions become less and less viable in a world where the "price" of biodiversity reflects its scarcity. A fair section of Dasgupta's book is devoted to this issue of valuing or pricing the environment. The issue is whether we have got very far in valuing the benefits of biodiversity conservation. So far, progress seems very limited. But even if we knew the economic value of biodiversity, that is not enough. Markets everywhere have to be created and reformed to reflect these values. Here there are encouraging signs, not discussed by Dasgupta, as communities and states increasingly recognise the need to pay for nature's services.

The final sections of the book are probably the most interesting for those who are already familiar with Dasgupta's wide-ranging work. One of the deeper puzzles in the philosophy of development is how to evaluate policy in a manner that integrates the wellbeing of potential (not yet existent) people with actual people who exist now. Dasgupta sketches out ideas that clearly (and hopefully) are to be the subject of further work. The sketch invokes the idea of individuals as beings in a time continuum that extends beyond their physical lives. At its simplest, many decisions are made that are unrelated directly to our own wellbeing, and very much to the wellbeing of our descendants. For Dasgupta, this is more than parental altruism. It is some kind of genetic driver, something that makes us want our values to survive in our children. As he puts it: "Our descendants do something supremely important for us here: they add a certain value to our lives which our mortality would otherwise deprive them of."

Some will construe these final remarks as coming close to a critique of economics. That economics has its limits is clear. But the positive messages are far more powerful. This book is a testament to the force of economic reasoning. The final question is whether we can live comfortably with this in-built genetic compulsion to live through time as well as in it, while at the same time watching the loss of so much of the world's natural assets. If the drive is a genetic concern for immortality of values, we can ask why so many feel we need reforms in ethical behaviour to ensure sustainability. Dasgupta touches on some of the framework needed to answer this question. More is needed. If anyone is going to supply it, it is highly likely to be Partha Dasgupta.

David Pearce is professor of environmental economics, University College London.

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