Economics of Sustainable

Development

ecological debtor. It suggests the country

is depleting its ecological assets and its
productive base more than contributing
to its growth. These analyses tend to
argue that the current global level of consumption is unsustainable.

K S Kavi Kumar

Sustainable Development

he growing population and the

never satiated demands for higher
and higher consumption pose concerns regarding the sustainability of the
impressive economic growth registered
by many countries including India. Since
the increasing demand of the population
is often met by the greater exploitation
of available resources, this tends to exert
additional pressure on the aggregate
resource base of the economy. The natural question which has come to occupy
the minds of contemporary policymakers and social thinkers is whether
the impressive growth rates of the global
economies can last and, if so, how.
Ramprasad Senguptas seminal contribution provides an exhaustive treatment of this issue, bringing together the
vast expertise and experience the author
has gained over several decades of committed research on the interface of energy,
economics and environment. In the first
four chapters of the book, Sengupta
provides a detailed discussion on the
linkages between ecology and economics
and reminds us about the importance of
acknowledging not only the biophysical
limits and the limits of assimilative capacity of nature, but also the role played by
the fundamental thermodynamic laws
in understanding economic systems.
The author cautions us that economic
growth cannot bypass the laws of thermodynamics. Put simply, the first law
states that something cannot be produced
out of nothingin other words, there is
always a requirement of a irreducible
minimum quantity of resources for producing material objects. The second law
(also known as the entropy law) insists
that same matterenergy cannot be
used repeatedly for similar purposes.
While theoretically the thermodynamic
laws constrain the potential for long-term
economic growth, the literature has been
34

book reviewS
Ecological Limits and Economic Development:
Creating Space by Ramprasad Sengupta, New Delhi:
Oxford University Press, 2013; pp xxvi + 365, Rs 1,250.

divided in terms of identifying the

signs of such limitations. The factors
fuelling optimism are that human innovation and ingenuity may, after all,
take us beyond the thermodynamic
laws and meet the growing demand of
global economies for services that there
will be a steady increase in resource
efficiency, and there will be a growing
share of renewables in the energy-mix.
Yet, as Sengupta acknowledges, the
growing population pressure does put
additional pressure on our ability to
continuously innovate. The collective and
growing needs of over 7 billion people
are never going to be easy to meet.
Incidentally Rob Dietz in his book,
Enough Is Enough: Building a Sustainable
Economy in a World of Finite Resources
(Berrett-Koehler Publishers 2013), puts
such numbers into perspective by quoting
National Geographic statisticsit takes
200 years to count to 7 billion aloud; also
in 7 billion steps one can circumnavigate
the globe some 133 times. Given that the
subject matter of the book is relatively
difficult to comprehend, Sengupta should
have used such anecdotes to retain the
readers attention.
Sengupta quotes the findings of the
ecological footprint1 analysis and argues
that the worlds present demand on the
biosphere is already 25% more than the
biocapacitythe biospheres ability to
meet the demand. In the case of India, it
is estimated that the total national footprint has doubled since 1961. It is also
shown that the balance between Indias
demand on and supply of natural capital
has worsened, leaving the country an

In economic parlance, sustainable development requires maintenance of intergenerational well-being, that is, ensuring that the total well-being of the individuals in future generations does not
decline over time. In other words, sustainable development ensures that the
future generations of individuals are
at least at the same level of welfare as
todays generation. Hence, intergenerational equity in the welfare of the future
generations lies at the heart of sustainable development. In this broader view of
sustainability, an economy is sustainable
if and only if it is dynamically efficient
and the resulting stream of total welfare
levels is non-declining over time (Stavins
et al 2003).
Arrow et al (2012)2 follow a similar
approach to define sustainability as the
non-declining intergenerational wellbeing over time. That is, sustainability
depends on the capacity to provide wellbeing to the future generations of individuals. The indicator of this capacity is
called comprehensive wealth (the social
worth of the entire range of capital
assets constituting the productive base
of an economy), including both marketed
and non-marketed assets. The sustainability criterion is satisfied if this comprehensive wealth measure is increasing on
a per capita basis. Arrow et al (2012) take
a comprehensive view of sustainable
development by considering the entire
productive (capital) base of an economy.
The capital base includes reproducible
capital goods (for example, roads, buildings, etc), natural capital (ecosystem,
minerals, etc), population (its size and
demography), intellectual capital (for
example, public knowledge), and institutions (formal and informal) which
help in resource allocation.
The author acknowledges that the
market for several of these assets may

JANUARY 16, 2016

vol lI no 3

EPW

Economic & Political Weekly

BOOK REVIEW

not exist, and estimates the shadow

prices for a number of capital assets.3
For example, consider clean air as an asset for which a market does not exist.
Nevertheless, since clean air is one of
the most important ingredients of life,
it carries some value. In this sense,
the maximum price that one would
be willing to pay for an extra unit of
clean air (that is, to avoid an extra unit
of pollution) is the shadow price of
pollution. These shadow prices are used
to estimate the value of comprehensive
wealth. Using this, it is shown that an
economys intergenerational well-being
is dependent on its comprehensive wealth.
In other words, intergenerational wellbeing will not decline over a specified
period of time, if and only if economys
comprehensive wealth does not decline
over the same period.
To infer whether or not a country is
on the path of sustainable development,
Arrow et al (2012) adopted the concept
of comprehensive investment (net addition to the stock of comprehensive wealth,
holding the shadow prices constant). This
is equivalent to the notion of genuine
savings as introduced by Pearce and
Atkinson. Genuine savings (Sg) refer to
that level of savings, over and above the
sum of all the capital deprecations in
the economy. Intuitively, if Sg > 0, any
nation must be adding to its capital
base. If Sg < 0, then the nation is running down its capital stock. As it happens, one cannot tell too much from the
value of Sg at any point in time as the
interest is in the entire consumption path,
not just one point on it. However, if Sg is
persistently negative then it can be
inter preted that things do not look good
for sustainability. If Sg is persistently
positive, then there is a greater chance
that the way the economy is configured
is sustainable.
Ecological Dimension
While Ramprasad Sengupta provides a
comprehensive account of the economic
understanding of sustainability, he also
highlights the limitations of the mainstream conceptualisation of potential
ecological limits that economic development has to confront. Referring back to
the thermodynamic laws, he argues
Economic & Political Weekly

EPW

JANUARY 16, 2016

that, for instance, accounting for energy

flow in isolation without relating it to
the total energy flow in the ecosystem,
including flows through the humans as
food energy as well the associated subsidies, will provide only a partial picture
and misses proper accounting of potential ecological limits.
Sengupta also emphasises the need for
avoiding creation of multiple sub-branches
to deal with the challenge of ecological
limits and entropy law to the sustainable
functioning of the economy. Such distinctions are unwarranted and will end
up addressing the challenges inadequately. For example, eco-taxes designed for addressing market failures
(without accounting for the role of limits
of the ecosystem that lie at the root of
market failure) from a purely environmental economics perspective could
be ineffective in fostering sustainable
economic growth.
Yet, in the discussion surrounding
policies to foster sustainable development, the book falls short in addressing
ecological limits, and the discussions are
largely restricted to the environmental
dimension. In the context of technology
and resource development, the discussion is limited to technology development for overcoming environmental
concerns but not deep ecological manifestations of our current economic development. Sengupta appropriately identifies the role of human values in this context, which is often kept outside the
mainstream policy prescriptions.
A more detailed discussion covering
the following aspects would have enriched the book: How crucial are human
values in fostering sustainable development? Are we aping each other? Or are
there some societal characteristics reflected in lifestyles that could sustain
growth without harming environment?
Can we mould human values in such
direction to ensure sustainable development? What is the scope of advanced
techniques like agent-based models in
modelling human values?
Overall, despite employing simple
and elegant dynamic models with endogenous ecosystems for identifying
relevant policy directions, the prescriptions provided are largely in the known
vol lI no 3

domains such as technological change.

One possible reason for this could be
the implicit faith reposed by the author,
like many other contemporary thinkers,
in capital for fostering technological
innovation.
Scope and Coverage
Chapters 6 to 13 form the core of the
book and provide a very detailed discussion covering crucial sectors including land, water, forests, biodiversity,
energy and waste. However, the book
does not provide a clear rationale for
the focus on these sectors: Are these
chapters focusing on resources, or on
mediums, or on cross-cutting themes?
The chapters are a mix of all these in
the book. Moreover, the reason for
focusing explicitly on India could have
been explained in greater detail: Is it
because of Indias population size, or its
enormous growth potential? Also, by
focusing on India, the author does not
connect with historical political economy
issues of exploitation by foreign rulers
and their impact on Indias ecology. It
would have also been useful if the book
had provided some discussion on traditional knowledge and its role in ensuing
sustainable development.
All these are minor limitations of an
excellent book that treads the lesser
understood interdisciplinary territory
of ecology-environment-economy interface. By going deep into this interface,
Sengupta attempts to create space for
a new paradigm of analytical investigation. The book will serve as an excellent reference material for masters and
doctoral level students, researchers
working in the fields of ecological and
environmental economics, and public

Permission for Reproduction of

Articles Published in EPW
No article published in EPW or part thereof
should be reproduced in any form without
prior permission of the author(s).
A soft/hard copy of the author(s)s approval
should be sent to EPW.
In cases where the email address of the
author has not been published along with
the articles, EPW can be contacted for help.
35

BOOK REVIEW

policymakers. If the technical details

can be circumvented, the book has great
appeal to general readers too who are
concerned about human influence on
nature.
K S Kavi Kumar (kavi@mse.ac.in) teaches at
the Madras School of Economics, Chennai.

36

Notes

References

Arrow, K J, P Dusgupta, L H Goulder, K J Mumford

and K Oleson (2012): Sustainability and the
Measurement of Wealth, Environment and
Development Economics, 17(3): 31753.
Stavins, R N, A F Wagner and G Wagner (2003):
Interpreting Sustainability in Economic
Terms: Dynamic Efficiency Plus Intergenerational Equity, Economics Letters, 79: 339 43.

2
3

The Ecological Footprint measures human demand on the biosphere in terms of the land and
sea area required to provide the resources we
use and to absorb the waste we generate.
Interestingly, Sengupta does not provide direct
reference to this influential work.
The maximum price that one is willing to pay
for an extra unit of a resource for which market
does not exist.

JANUARY 16, 2016

vol lI no 3

EPW

Economic & Political Weekly