Evaluating Projects and Assessing Sustainable Development in Imperfect Economies

45 Pages Posted: 22 Jan 2004

See all articles by Karl-Goran Maler

Karl-Goran Maler

The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics

Kenneth J. Arrow

Stanford University - Department of Economics

Partha Dasgupta

University of Cambridge - Faculty of Economics and Politics; The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics

Date Written: December 2003

Abstract

We are interested in three related questions: (1) How should accounting prices be estimated? (2) How should we evaluate policy change in an imperfect economy? (3) How can we check whether intergenerational well-being will be sustained along a projected economic programme? We do not presume that the economy is convex, nor do we assume that the government optimizes on behalf of its citizens. We show that the same set of accounting prices should be used both for policy evaluation and for assessing whether or not intergenerational welfare along a given economic path will be sustained. We also show that a comprehensive measure of wealth, computed in terms of the accounting prices, can be used as an index for problems (2) and (3) above. The remainder of the paper is concerned with rules for estimating the accounting prices of several specific environmental natural resources, transacted in a few well known economic institutions.

JEL Classification: D6, D9, E2, O2, O4, Q2, Q3

Suggested Citation

Maler, Karl-Goran and Arrow, Kenneth J. and Dasgupta, Partha, Evaluating Projects and Assessing Sustainable Development in Imperfect Economies (December 2003). FEEM Working Paper No. 109.2003. Available at SSRN: https://ssrn.com/abstract=486064 or http://dx.doi.org/10.2139/ssrn.486064

Karl-Goran Maler (Contact Author)

The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics ( email )

The Royal Swedish Academy of Sciences
P.O. Box 50005
S-104 05 Stockholm, SE-104 05
SWEDEN

Kenneth J. Arrow

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Partha Dasgupta

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics

The Royal Swedish Academy of Sciences
P.O. Box 50005
S-104 05 Stockholm, SE-104 05
SWEDEN

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