Sustainability of an economy relying on two reproducible assets

Abstract

The highest utility level that can be sustained in an economy is given by the maximin value. To be able to use this value for sustainability accounting, the corresponding maximin problem must be solved. This paper studies the sustainability of an economy composed of two reproducible assets, each producing one of two consumption goods which are substitutes in utility. We characterize the maximin path of the economy, and associated maximin shadow values. We discuss how these shadow values could be used as accounting prices for development paths that differ from the maximin trajectory. The corresponding genuine savings indicator informs on the improvement or decline of the sustainable level of utility and the prospects of future generations.