Are We Consuming Too Much?

Journal of Economic Perspectives, Vol. 18, No. 3, pp. 147-172, Summer 2004

Posted: 2 Nov 2004

See all articles by Kenneth J. Arrow

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

Lawrence H. Goulder

Stanford University - Department of Economics; National Bureau of Economic Research (NBER); Resources for the Future

Gretchen Daily

Stanford University - Department of Biology

Geoffrey M. Heal

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Paul Ehrlich

Stanford University - Department of Biology

Simon Levin

Princeton University - Department of Ecology and Evolutionary Biology

Karl-Goran Maler

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

Stephen H. Schneider

Stanford University - Department of Biology

David A. Starrett

Stanford University - Department of Economics

Brian Walker

CSIRO, Mathematical and Information Science

Abstract

This paper articulates and applies frameworks for examining whether consumption is excessive. We consider two criteria for the possible excessiveness (or insufficiency) of current consumption. One is an intertemporal utility-maximization criterion: actual current consumption is deemed excessive if it is higher than the level of current consumption on the consumption path that maximizes the present discounted value of utility. The other is a sustainability criterion, which requires that current consumption be consistent with non-declining living standards over time. We extend previous theoretical approaches by offering a formula for the sustainability criterion that accounts for population growth and technological change. In applying this formula, we find that some poor regions of the world are failing to meet the sustainability criterion: in these regions, genuine wealth per capita is falling as investments in human and manufactured capital are not sufficient to offset the depletion of natural capital.

Keywords: Sustainability, overconsumption, genuine investment, genuine savings, genuine wealth

JEL Classification: E21, I31, Q32, O10

Suggested Citation

Arrow, Kenneth J. and Dasgupta, Partha and Goulder, Lawrence H. and Daily, Gretchen and Heal, Geoffrey M. and Ehrlich, Paul and Levin, Simon and Maler, Karl-Goran and Schneider, Stephen H. and Starrett, David A. and Walker, Brian, Are We Consuming Too Much?. Journal of Economic Perspectives, Vol. 18, No. 3, pp. 147-172, Summer 2004. Available at SSRN: https://ssrn.com/abstract=611907

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

Lawrence H. Goulder (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
650-723-3706 (Phone)
650-725-5702 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Resources for the Future

1616 P Street, NW
Washington, DC 20036
United States

Gretchen Daily

Stanford University - Department of Biology ( email )

Gilbert Building, Rm 109
371 Serra Mall
Stanford, CA 94305
United States

Geoffrey M. Heal

Columbia Business School - Finance and Economics ( email )

3022 Broadway
New York, NY 10027
United States
212-854-6459 (Phone)
212-316-9219 (Fax)

HOME PAGE: http://www.gsb.columbia.edu/faculty/gheal/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paul Ehrlich

Stanford University - Department of Biology ( email )

Gilbert Building, Rm 109
371 Serra Mall
Stanford, CA 94305
United States
Not Available (Phone)
Not Available (Fax)

Simon Levin

Princeton University - Department of Ecology and Evolutionary Biology ( email )

Princeton, NJ 08544
United States
Not Available (Phone)
Not Available (Fax)

Karl-Goran Maler

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

Stephen H. Schneider

Stanford University - Department of Biology ( email )

Gilbert Building, Rm 109
371 Serra Mall
Stanford, CA 94305
United States

David A. Starrett

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
650-723-4291 (Phone)
650-725-5702 (Fax)

Brian Walker

CSIRO, Mathematical and Information Science ( email )

Lyneham, Australian Capital Territory 2602
Australia
Not Available (Phone)
Not Available (Fax)

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