One-sided Unsustainability Tests and NNP Measurement with Multiple Consumption Goods

Reference:

Pezzey, J. C. V., 2002. One-sided Unsustainability Tests and NNP Measurement with Multiple Consumption Goods. Working Paper. Australian National University.

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Abstract

In an economy with multiple consumption goods (including environmental amenities) that uniquely maximises the present value of utility with constant or falling augmented green net national product, or zero or negative augmented investment, at any time implies that the economy is unsustainable then. "Augmented" means that time is included as a productive stock, which incorporates future exogenous technical progress and changes in world prices in a unified accounting framework. Examples are given of calculating accounting prices for multiple goods. The practical and philosophical rationale for testing sustainability in a present-value maximising, and therefore fully prescribed, development path is discussed.

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