Is Economic Growth Sustainable? Natural Resources and the Environment

Abstract

[We] examine the effects of climate shocks on economic activity. At the aggregate level, [we] have demonstrated that higher temperatures in a given year reduce the growth rate of GDP per capita, but only in poor countries. (Jones and Olken 2010:454) Economists therefore should be very interested in impossibility theorems, and I would like to suggest one – namely, that a U.S.-style resource consumption standard for a world of 4.8 [now 7] billion people is impossible. (Daly 1996:104) Sustainable Development Sustainable development refers to “progress that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Sustainability means not only the survival of the human species but also maintaining the productivity of natural, produced, and human assets from generation to generation (United Nations World Commission on Environment and Development [Brundtland] 1987). This chapter analyzes natural resources and the environment in less-developed countries (LDCs) and whether development is sustainable, given resource depletion and environmental damage. We analyze the effect of changing real oil prices on consumption; the adverse impact of Dutch disease in a booming export sector; whether abundant resources might be a curse; the effect of poverty on the environment; market imperfections that contribute to environmental degradation; the changes in pollution with economic growth; a decision-making rule for abating pollution; how to place a monetary value on pollution discharges; the growth of arid and semiarid lands; economic development in tropical climates; policy toward environmental resources, such as biodiversity and climate; the extent to which growth is limited by natural resources; measures of economic welfare that consider resource depletion and environmental damage; and developed countries??? (DCs???) ethical dilemmas in a world of limited resources and income inequalities.