This paper highlights the economic concepts which are considered important to sustainability. These concepts are scrutinized and analyzed. There is a lot of emphasis on economic elements, which affects sustainability in various ways. The three pillars of sustainability affect the various factors of sustainability in regards to natural resources. Economic drivers influence the over-exploitation of natural resources, which are important in development, but on the other hand, extensive exploitation degrades them. Various socio-economic factors affects sustainability and how the issue of sustainability needs to be addressed.
The Gross Domestic Product (GDP) and Gross National Product (GNP) are known as indicators of success in economics. It is assumed that GDP and GNP assist the overall economic growth to peoples lives of the country. This is a Pareto-improving theory. In which, one makes some members of society better off, but makes no one worse off (Pareto, 1896). In reality, economists are the most reluctant groups in addressing issues of sustainability since they treat sustainability as a resource economic issue rather than an issue of the public (Ratner, 2004). This is an erroneous way of thinking. Many times the people at the top benefit, yet the people at the bottom continue to suffer. The reason why economists are reluctant of recognizing sustainability as a public issue is due to the fact that the concept of sustainability is fundamentally incompatible with the conventional economic theory (Rogers & Jalal et al, 2008). Nonetheless, it is evident that when a person wants to study sustainability, it does require additional economic theory, which should be inclusive. There are some economic concepts, which are vital in sustainability. Most of them apply to the principles of willingness-to-pay. In applying the principles of willingness-to-pay, it is necessary to analyze the impacts of the environment and economic growth, to take into account the environmental and social impact, to treat nature as an economic externality, and to utilize the natural resources in a conservative manner in order for a development project to be considered sustainable.
Economic Concepts Considered Important in Sustainability
Sometimes elasticities alone are not enough and one must estimate the willingness to pay for development project. For example, there was a model of the demand for schooling in Peru, in which it was calculated that rural Peruvian households at all income levels are indeed willing to pay fees high enough to cover the operating costs of new schools in their villages (Gertler, 1989). The poor were willing to pay but more relative to their income to solve the budget crisis. Islam and Clark (2005) conclude that when a country seeks to improve their GDP pursuing such extreme high growth objectives without due environmental and social considerations can threaten present social welfare and future sustainability. Economic concepts of wealth and utility are important to all human undertakings (Rogers & Jalal et al, 2008). However, Paretos notion of efficiency and optimality does not hold (Rogers & Jalal et al, 2008). Contrary to the Kuznets curve theory of increasing wealth to achieve sustainability, increased wealth many times creates inefficient "land use, waste generation, loss of biodiversity and greenhouse gas emissions (Spangenberg, 2004). This economic concept contradicts with the environment. All economic concepts should integrate the social cultural dimensions and in the analysis of sustainability (Brown, 2008). Contrary to Paretos theory, economic growth in a country may not raise the standard of living for all of its population. Rogers (2008) states that even if the GDP per capita grows, the income gap between the richest 20% and the poorest 20% may not improve and in fact may even widen. This shows that indeed when one group is better off the other group is worse off. In fact the Gross National Product (GNP) may increase even though economic conditions for many groups in different regions in the country are declining(Hawken, 2005). The GDP and GNP indicator tools are not accurate in portraying whether a country has equity among its populace. There is an intrinsic value of peoples lives and health and polluting the air, water and land should be part of this analysis. An overall increase in income for the entire populace is a social dimension that must be achieved in order for an economic activity to be considered sustainable. Sometimes it is expensive to protect the environment and the people. It is necessary that sustainable economics be termed to represent a broader category of ecological and environmental variables and that the issues are part of a multidimensional perspective (Toffel, 2005). The environment has a economic value as well and this must be part of the multidimensional perspective. It can be noted that sustainability is broader than the issue of sustainable utilization of the natural resources. It is evident that the major challenge with sustainability is how we can raise the living standards of human beings whistle managing our natural resources in good method. Therefore, there is a need of using technologies and strategies, which can be able to break the link between economic growth and resource depletion (Rogers & Jalal et al, 2008). For that reason, if we have to address this issue, several areas need to be changed (Ratner, 2004). For instance, there is an importance of analyzing what are the impacts of the environment if economic development is not checked. Another economic analysis that requires to be done concerns the issue of treating nature as an economic externality (Toffel, 2005). Finally, it is important to consider issues related to economic growth, which takes into account the environmental and social impact (Nemetz, 2006). These concepts are important to sustainability because the world has a population dilemma. Altogether, the population of the world has doubled in the last half of the 20th century, but the use of resources grew by over three or four times in the same period of time (Blewitt, 2008). As more people are added to this world, resources continue to be depleted and economic growth adds stress to this problem. It is evident that there is a close relationship between environmental degradation and economic growth (Soederbaum, 2008). The tragedy of the commons leads to lower consumption and growth, and a weak system of property rights results in one lavishing on the fruits of domestic investment whereas in private property capital flight occurs (Tornell,1992). If there are only a few fish in the ocean than many fishing companies will not profit from fish, furthermore countries with no property rights risk losing investment to those with property rights, for investors want to avoid the tragedy of the commons. Degradation of the environment may result in an economic concept that does not account for the externality. Unsustainable economic growth therefore eats the natural resources, which support the growth (Brown, 2008). Concerns have been raised from various experts that if the use of resources is not checked, it will reach a breaking point where the globe will come into a halt. Whereas the economist are usually concerned mainly on economic development and efficient allocation of natural resources, the ecological economist have the precise objectives of sustainable scale, fair distribution of resources and efficient allocation of resources respectively. Sustainability studies usually look into ways of reducing the usage of resources during the production of goods and services (Toffel, 2005). Nonetheless, this is usually achieved from better management of the economy, usage of alternatives technologies and redesigning the products (Blewitt, 2008). Conversely, ecological economics usually involves studying of the societal metabolism and this involves the input and output processes in an economic system relatively to environmental quality (Rogers & Jalal et al, 2008). Based on these facts, it is evident that one of the approaches of ensuring sustainability is through the various attempts that are made to internalize the externality and this is through the use of market strategies such as incentives and eco-taxes, permits for carbon, which are tradable, and also encouraging the payment of environmental services among others (Hawken, 2005). Another mechanism, which can be used, is the use of green economics, which attempts to address several issues related to the environment and equity (Ratner, 2004). These strategies have been termed as a market oriented approaches. Altogether, when internalizing externalities, sustainability can be achieved since companies are not forced to pay back to the environment and they do this willingly. Another economic concept that is important in sustainability is the economic opportunity and this is whereby the environment is treated as an externality and hence generating short-term profit at the expense of sustainability (Soederbaum, 2008). However, it is evident that some sustainable business practices do integrate ecological needs with the economic and social concerns (Toffel, 2005). Therefore, any growth that destroys the natural resources can be termed as uneconomic because it leads to poor quality of life. Thus if we can be able to minimize such type of growth, it can provide opportunities to the local business and this can be inform of various types of businesses such as industrial wastes being used to produce other products (Rogers & Jalal et al, 2008). From this analysis, it is evident that the issue of sustainability is mainly based on several attributes. This involves asking several questions such as what is the sustainability of the economy or is the society sustainable among others (Brown, 2008)? Therefore, it is important to ensure that the natural resources are used in a sustainable manner whistle developing the economy (Nemetz, 2006). The issue of sustainability will continue to be a question with no definite answer since economist wants to maximize the resources within the shortest period and gain maximum profit. Global co-operation is clearly the best option; however, a developing country may obtain higher benefits through taking opposite measures or through not taking any actions at all when the majority of other countries take actions for mitigating the externalities. The free-rider problem relegates the environment to a second or third level a country might, in the short term, achieve a perceived increment in economic growth, yet this strategy is not collaborative and does not give an optimal solution in the longer term (Lozano, 2007). Moreover, we should not assume that since something has been sustained up to now, it does not mean that is will be sustained forever (Toffel, 2005). It is important to utilize our natural resources in a sustainable manner to ensure continuity.
Features that must be there for a Project to be Sustainable
For a project to be termed as sustainable, it is supposed to have several features. Some of these features usually involve the social dimensional feature, economic features and environmental features, better known as the triple bottom line approach (Rogers & Jalal et al, 2008). A project is supposed to encompass these three features in order to be termed as sustainable. The environmental dimension is very important in the sustainability of any project because all economic activity utilizes the environment and hence depleting the natural resources (Markandya, 2006). Therefore, project managers should ensure that any economic development has consideration for the environment in order for their project to be sustainable. Another feature that is important in ensuring that a project is sustainable is the social attribute (Soederbaum, 2008). The social dimensions are very important since the society must benefit from the project in the long term. Economic features are very important in sustaining a project due to the fact that a project goal should not be all about reaping maximum benefits from the environment, but also sustaining the environment in a manner that the project will be able to reap benefits for a longer period of time and this can be undertaken through efficient use of natural resources. Therefore, it is evident that there is need of reconciliation of the social, environmental and economic demands for projects (Ratner, 2004). These three features are also referred to as the pillars of sustainability.
There is more to sustainable than economic growth. As Kulig (2010) notes, Amartya Sen considers the development of a country as the expansion of peoples capabilities. It is evident that there are several economic factors that affect sustainability. However, most of the factors revolve around better management of our natural resources since they play a great part in driving the economy. The essence of sustainability lies in the treatment of the present and thinking about the future that places a positive emphasis on the very long run, recognition of all the ways in which environmental assets or natural capital contribute to economic well-being, and recognition and implementation of any constraints on economic activity implied by the dynamics of environmental assets (Heal 1998). Economics need to understand the issues concerning sustainable development since it would be hard for an economy to grow in perpetuity without factoring in the finite natural resource issues. Therefore, this calls for better management of the resources by all the stakeholders. Nonetheless, it is evident that sustainability is usually affected much by different economic concepts. Lastly, it can be highlighted that a project can be termed to be sustainable if it encompasses the environmental and social-economic issues prior to its development. Without protecting the environment no long standing economic activity will hold.
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