An axiomatic approach to sustainable development

The paper proposes two axioms that capture the idea of sustainable development and derives the welfare criterion that they imply. The axioms require that neither the present nor the future should play a dictatorial role.Theorem 1 shows there exist sustainable preferences, which satisfy these axioms. They exhibit sensitivity to the present and to the long-run future, and specify trade-offs between them. It examines other welfare criteria which are generally utilized: discounted utility, lim inf. long run averages, overtaking and catching-up criteria, Ramsey's criterion, Rawlsian rules, and the criterion of satisfaction of basic needs, and finds that none satisfies the axioms for sustainability.Theorem 2 gives a characterization of all continuous independent sustainable preferences. Theorem 3 shows that in general sustainable growth paths cannot be approximated by paths which approximate discounted optima. Proposition 1 shows that paths which maximize the present value under a standard price system may fail to reach optimal sustainable welfare levels, and Example 4 that the two criteria can give rise to different value systems.This paper was prepared for a presentation on Reconsideration of Values at the Stanford Institute for Theoretical Economics, organized by K.J. Arrow in July 1993. It was also presented at Intergovernmental Panel on Climate Change Seminar in Montreux, Switzerland, March 1994, at a Seminar on Inconmensurability and Values at Château du Baffy, Normandy, April 1994, and at the Graduate School of Business of Stanford University in May 1994. e mail gc@columbia.edu.