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What Can Economic Analysis Contribute To The ‘Sustainability’ Debate?

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  • Jonathan A. Lesser
  • Richard O. Zerbe
Abstract
Economics generally, and benefit‐cost analysis in particular, are not substitutes for values. They are tools of analysis that rest on assumptions about values. The primary role for economics in normative analysis is to provide information about efficiently achieving that which is valued, not to make the decision. The major economic tool for analyzing normative issues is benefit‐cost analysis. This paper considers the role of benefit‐cost analysis in addressing the sustainability debate. The notion of “sustain‐ability” raises concerns about values held by society. The analysis here addresses several issues within the sustainability debate: concerns about intergenerational equity including the appropriate discount rate for projects with environmental consequences; implications for burdens on future generations; and the moral basis for benefit‐cost analysis. The authors argue that the correct discount rate for all such projects is the social rate of time preference, and that suggestions for using lower discount rates result from attempting to prevent inequities by adjusting prices. Additionally, the authors argue that economic analysis, especially benefit‐cost analysis, can play a useful role in providing information to decision makers, who ultimately will face resource allocation issues as they seek to implement policies promoting sustainability.

Suggested Citation

  • Jonathan A. Lesser & Richard O. Zerbe, 1995. "What Can Economic Analysis Contribute To The ‘Sustainability’ Debate?," Contemporary Economic Policy, Western Economic Association International, vol. 13(3), pages 88-100, July.
    • Handle: RePEc:bla:coecpo:v:13:y:1995:i:3:p:88-100
    DOI: 10.1111/j.1465-7287.1995.tb00725.x
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    References listed on IDEAS

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    1. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
    2. Knetsch, Jack L., 1990. "Environmental policy implications of disparities between willingness to pay and compensation demanded measures of values," Journal of Environmental Economics and Management, Elsevier, vol. 18(3), pages 227-237, May.
    3. Friend, Anthony M. & Rapport, David J., 1991. "Evolution of macro-information systems for sustainable development," Ecological Economics, Elsevier, vol. 3(1), pages 59-76, March.
    4. Richard C. Bishop, 1978. "Endangered Species and Uncertainty: The Economics of a Safe Minimum Standard," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(1), pages 10-18.
    5. Richard Howarth & Richard Norgaard, 1993. "Intergenerational transfers and the social discount rate," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 3(4), pages 337-358, August.
    6. William N. Trumbull, 1990. "Who has standing in cost-benefit analysis?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(2), pages 201-218.
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    Cited by:

    1. Mark A. Moore & Anthony E. Boardman & Aidan R. Vining & David L. Weimer & David H. Greenberg, 2004. "“Just give me a number!” Practical values for the social discount rate," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(4), pages 789-812.
    2. Richard O. Zerbe, 1998. "Is cost-benefit analysis legal? Three rules," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 17(3), pages 419-456.

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