Sustainable Economic Development

Question 1
One of the key challenges and needs identified by the ISC team is financing. The other challenges include, collaboration, making the case for prosperity through sustainability, taking a comprehensive approach to green empowerment, and data (Institute for Sustainable Communities – ISC, 2011, p. 7). As the authors point out, “transitioning to a sustainable economy will require significant investments from both public and private entities…” (ISC, 2011, p. 6). It should, however, be noted that funding is a finite resource. Further, the very nature of the said transition makes actual costs uncertain – effectively meaning that there could be a mismatch between the actual costs and the funds allocated. This brings about what is referred to as a cost overrun or cost underrun risk, which in essence is a situation whereby an undertaking’s costs either go above or below the initial cost estimate (Boyd, 2012, p. 314). The achievement of optimal outcomes is complicated by the inherent challenges associated with defining tradeoffs in undertakings of this nature. Given the scarcity of means, “choices have to be made between means or between ends” (Wantzel, 2016, p. 36). It is for this reason that ISC calls for more innovative funding models. Some of the considerations that ought to be highlighted in this case include the establishment of dedicated funds tailored to engage both traditional and new partners. Traditional partners have in the past comprised of the government, foundations, and wealthy persons. On this front, local wealth could also be taped. This particular approach could be effective as such persons are very familiar with their local settings and therefore support initiatives whose progress they can easily track and be part of. In basic terms, it should be noted that to meet development goals, more funds may be required. In the end, however, innovative financing ought to play a complimentary role – and no attempts should be made to limit (or replace) government involvement.
Question 2
Pezzey and Toman (2002) point out that “a sustainability objective or standard… is more than a simple PV criterion” (p. 29). The implications of their seemingly simplistic statement are profound. Decision makers face unique challenges when it comes to the assessment of how desirable projects and policies are. This is more so the case with the full realization that today’s undertakings and choices have consequences in the long-term. With this in mind, it therefore follows that the assessment of the viability of policies with long-term benefits and costs using PV could prove challenging. Thus what Pezzey and Toman mean with the statement highlighted above is that sustainability goals go beyond the maximization of the present utility of outcomes. As a matter of fact, it has been pointed out that “one variant of the weak sustainability measure is that the present value of development benefits should be positive” (Pearce, Barbier, Markandya, 2013, p, 4). Pezzey and Toman (2002) point out that from time to time, a conventional PV standard or objective drives the investment behavior in the market (p. 10). In the past, various texts have queried the “moral underpinnings of the PV criterion and drawing attention to other moral criteria (such as concepts of environmental justice and stewardship) that are important for intergenerational resource allocation” (Pezzey and Toman, 2002, p. 10). In essence, sustainable development ought to address present needs while at the same time ensuring that the ability of the coming generations to confront resident or emerging needs at that time is not compromised. Larson (2007) suggests that future generations ought to be offered some form of compensation for resource depletion (p. 235). In the final analysis, it is important to note that as Pezzey and Toman (2002) note, the intergenerational equity debate is effectively foreclosed by PV optimality, thus effectively advancing all the rights to resources to the present-day generation (p. 15).
Question 3
The Environmental Kuznets Curve is, in essence, “a hypothesized relationship between various indicators of environmental degradation and income per capita” (Stern, 2004, p. 1422). As the author further points out, this model argues that an increase in income per capita first leads to a rise in environmental degradation indicators, and then a descent in the same (Stern, 2004, p. 1422). Thus in general, an initial phase of economic development is likely to be accompanied by environmental deterioration, more specifically as pollution increases. This is because economic empowerment and growth is often (at least initially) accompanied by what Barbier and Markandya (2013) refer to as increased energy combustion, and hence increased Co2 emissions from factories and motor vehicles and over-utilization of finite resources (p. 96). The society, however, later on makes amends with the environment after its economic growth reaches a certain point – thereby bringing down the rate of environmental degradation. This, as Stern (2004) points out, could be a consequence of an increase in resources available to invest in environmental preservation (p. 1425). Also, when long-term economic activity is accompanied by improved technology, then productivity is in most cases enhanced using minimal raw materials, i.e. fuel. From a generalist perspective, therefore, this particular model seems to argue that an environment, in the long-run, benefits from economic growth. The resulting curve, according to Stern (2004), is an inverted U – with the Y axis being representative of environmental degradation and the X axis representing economic development (p. 1422). The curve has, however, been criticized on various occasions. For instance, some, like Siebert (2005), argue that in some instances, economic growth brings about an accelerated rate of environmental degradation (p. 412). The author further points out that “even in situations where the EKC hypothesis seems valid, we should be wary of concluding that economic growth alone will result in environmental improvements” (Siebert, 2005, p. 412).
Question 4
In basic terms, the ultimatum game has got to do with the investigation of the nature and conduct of self-interest. Here, the purpose is to identify the extent to which the distribution of offers is subject to the origin of the endowment used in bargaining” (Altman, 2006, p. 443). In an experimental setting or context, the ultimatum game involves two entities – a responder and a proposer. The proposer is presented with a resource, asked to divide the said resource into two and present either portion to the responder. If the responder takes the offer, then the amount is divided amongst the two as per the proposal, but if the responder rejects the offer, both entities walk away with nothing. In the final analysis, therefore, it is the decision of the responder that carries the day. The ultimatum game has a game theory application as the decisions made by the parties (i.e. the responder and the proposer in this case) are largely interdependent. With regard to decision making and market coordination, the ultimatum game implies that as each participant in the market seeks to develop its approach, it has to take into consideration the decision or move likely to be made by other parties and the trade-offs involved. The assurance problem introduced by Hanley, Shogren, and White (2007) can, using the ultimatum game, be solved by way of collaboration (p. 17). In the said collaboration, mutual trade-offs and pay-offs can be agreed upon so as to avert a situation whereby each party is only motivated self-interest. As a matter of fact, past studies have indicated “cooperation and collaboration as prerequisites for sustainable development” (Brulin and Svensson, 2016, p. 44). Collaboration would work because the ultimatum game is, in essence, about preferences and rationality. Devoid of such an approach, irrationality would reign supreme as parties attempt to maximize gains.
Question 5
There are many steps that could be taken in an attempt to promote green economy in my country. A green economy is defined by UNEP “as one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities” (Barbier and Markandya, 2013, p. 139). The steps that could be implemented include, but they are not limited to, the creation of awareness regarding environment preservation, formulation of property rights, and the imposition of a green penalty (in which case environmental violations would be accompanied by sanctions such as a prison term or heavy fines/penalties). Green penalties, as Larson (2007) observes, enhance compliance in instances whereby the motivation to violate the environment is significant (p. 43). In my opinion, formulation of property rights could prove most effective. This is more so the case given that they would give incentives to the local communities to better manage and preserve the resources in their control, thereby reducing the rate of environmental degradation. The involvement of the community in both rule crafting and decision making is in itself an incentive in conservation efforts. In essence, this is akin to decentralized environmental management. I am also convinced that this is an approach businesses would be keen to support as part of their CSR initiatives. It is important to note that as XXXXXX points out, “the concept of a green economy does not necessarily reject economic growth, but instead seeks to foster growth that is compatible with sustainability” (p. 409). As the author further points out, available evidence suggests that employment opportunities as well as wealth creation are not in any way inhibited by an economy’s ‘greening.’ On that basis, countries have no basis whatsoever to dodge efforts towards the promotion of green economies. It is for this reason that the relevance of various steps highlighted above cannot be overstated.





















References
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Barbier E.B. & Markandya, A. (2013). A New Blueprint for a Green Economy. New York, NY: Routledge
Brulin, G. & Svensson, L. (2016). Managing Sustainable Development Programs: A Learning Approach to Change. New York, Routledge
Boyd, B. (2012). The COR/COTR Answer Book (3rd ed.). Tysons Corner, VA: Barrett-Koehler Publishers.
Hanley, N., Shogren, J. & White B. (2007). Environmental Economics: In Theory and Practice (2nd ed.). Belmont, CA: Palgrave Macmillan.
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Larson, B.A. (Ed.). (2007). Sustainable Development Research Advances. New York: Nova Publishers.
Pearce, D., Barbier, E. & Markandya, A. (2013). Sustainable Development: Economics and Environment in the Third World. New York, NT: Routledge
Pezzey, J.C. & Toman, M.A. (2002). The Economics of Sustainability: A Review of Journal Articles. Washington, DC: Resources for the Future
Stern, D.I. (2004). The Rise and Fall of the Environmental Kuznets Curve. World Development, 32(8), 1419-1439.
Siebert, H. (2005).
Wantzel, A. (2016). Creative Research in Economics. New York: Taylor and Francis.