Events > Lecture Series > Sjak A. Smulders

WWWforEurope Lecture Series

 

Sustainability and Wealth Accounting

Sjak A. Smulders

 

 

November 12th, 2013, 13:15 – 15:00

WIFO, Objekt 20, Arsenal



 

“How sustainable is the growth pattern of a national economy? At first, answering this question seems almost impossible, since this would require knowing what happens and what can happen in the future. Substantial progress has been made, and clever solutions have been developed for seemingly unsolvable problems in sustainability accounting, but we still face many fundamental challenges.”

 

Sjak A. Smulders is Professor of Economics at Tilburg University and adjunct Professor at the University of Calgary. He is an expert on endogenous growth theory and environmental economics and has published many journal articles and books on how to reconcile economic growth with finite natural resources and preservation of the environment. Download the presentation.



Commentary by Kurt Kratena

Researcher at the Austrian Institute of Economic Research (WIFO)



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Summary

On November the 12th Sjak Smulders, Professor at Tilburg University, gave a talk on „Sustainability and Wealth Accounting“. The overarching question with regards to the sustainability-economy relationship is whether our current growth path is sustainable. In other words: are we consuming too much?

Smulders compared the quest of sustainability to the story of Little Red Riding Hood, who has to choose which path to take through the woods.  Does she prefer the nice path with lots of flowers on the way or the boring, safe one, by which she will arrive at grandma’s house more quickly? The flowery path is corresponds to a high consumption path, which is fun while it lasts but eventually leads to catastrophe – Little Red Riding Hood being devoured by the wolf. The boring, safe path is the one where we restrict current consumption in order to ensure high living standards for future generations. What information does Little Red Riding Hood need to take the right decision? What information do we need?

Sound indicators of sustainability are crucial for distinguishing both paths. But do such indicators exist? This question is hotly debated.  Smulders introduced three popular notions of sustainability indicators: Green Accounting or the Green Net National Product approach, Genuine Savings by which investment and depreciation of all types of capital stock (natural, physical…) are taken into account; and the “maximin approach” which departs from the theoretical proposition of maximizing the utility of the poorest generation. 

Unfortunately, as Smulders demonstrated, in order for these indicators to truly measure sustainability, information about the entire future is required – information, which cannot be observed in the market.

Thus, sustainability indicators can never be developed by economists and statisticians alone – instead an interdisciplinary effort of climate scientists and social scientists is necessary.