Indicators of sustainable development: some lessons from capital theory

Abstract

Interest in sustainable development has prompted a search for suitable indicators that might complement or supplant the traditional measures of economic success. Although there is no agreement about the precise meaning of sustainable development, one idea which is increasingly in good currency is that sustainable development requires that the stock of capital that one generation passes on to the next be maintained or enhanced. Further, this stock of capital is seen by some to comprise two elements: manufactured capital and 'natural capital'. The extent to which these are believed to be substitutes or complements is one factor which separates the neoclassical school from some of its critics. A premise of this paper is that if capital theory is relevant to sustainable development, then it should also be helpful in developing indicators. However, even within the normal confines of economics, capital theory is not a homogeneous body of analysis. Therefore, an exploration of capital theory and its relevance to sustainable development can be expected to generate various perspectives on those measures most useful for gauging the sustainability of economic activity. It is these linkages between capital theory in various schools of thought and possible indicators of sustainable development that are the subject of this paper.