Solow Sustainable Summary

Joshua Bates

Dr. Sequeira

Econ 4333

24 February 2010

Solow Sustainable Summary

Sustainability is a pervasive topic; although, it may sound good on paper, the definition of leaving the Earth exactly as it was found may not be the best strategy.  It may not be feasible to not consume any resources, and the cessation of development likely is not desirable either.  A better definition may be that the same opportunities to be well off should be available to future generations as to the present.  This definition calls for productive capacity to be counted towards future prosperity; it also does not specify which resources must be saved for the future.  Inputs may be substitutable; making it less important what is saved so long as there is a usable substitute. 

Making policy in this way will likely result in mistakes; however, this should not stop policymaking.  Policy that is robust to mistakes wherever possible ought to be pursued.  Sustainability policy should not be left to the marked because the future is not well represented in the market.  Nor should it be left to the government necessarily, because government may be even more short sighted than the market.  However, our ancestors saved quite a bit and provided a largely sustainable future through their hard work and savings without any discussion of sustainability, so this can be very unpredictable.

Since sustainability seems to be the dichotomy between consuming now and saving for the future, the role of the environment becomes clear.  Profit can be had from the environment with present and future society bearing much of the cost.  Thus environmental policy contributes to sustainability, but only if it is at the expense of consumption; policy that costs savings and investment are not sustainable no matter what the cause. 

If a resource is discovered, a sustainable policy could be to use the resource and invest the profits.  In simple models, this has been shown to actually extend the capacity to consume into perpetuity.  A problem with this type of solution is that it would save for poor people in the future what could be used to help poor people today; in fact, it could be said to be unjust to help the ethereal future poor at the expense of the living poor.  However, other countries have both higher investment and fewer poor so investment could be accomplished without compromising current poverty.  As a first step, a better job could be done accounting for non-renewable resources as a source of national income, as a measure of minimal investment obligation.