Valuing the Future: Economic Theory and Sustainability

4 1 This is the preface and …rst chapter of my book Valuing the Future: Economic Theory and Sustainability, published by Columbia University Press. The entire manuscript can be read online on the Columbia press web site, Sustainability is a metaphor for some of the most perplexing and con-sequential issues facing humanity.Almost without exception, these issues are rooted in our economic behavior and organization. Yet it is not until very recently that there has been an economic theory of sustainability, or even any systematic application of existing theories to the issues to which it alludes. I hope that this book will help to place them more …rmly on our research agenda, and will also suggest that economics can contribute to understanding sustainability and that thinking about sustainability can us help to understand economics. Scienti…c disciplines grow by interacting with problems that stretch them to their limits, and there are many such problems in the complex of environmental problems associated with sustainability. One of the most intriguing of this set of problems is how we value the future, hence the title of this book. Economists have not really come to grips with valuing events that are centuries away. Typical economic time horizons di¤er by an order of magnitude from those that are typical for ecological or climatological phenomena. For economists, thirty years is a long time; for scientists concerned with the evolution of the environment, it is short. A lot of what follows is about reconciling these perspectives. I develop a framework for thinking about some aspects of sustainability. The framework is one for modeling the dynamic interactions of economic and biological systems, studying the time paths that can emerge from these, and then selecting one of these as optimal. I investigate alternative approaches to optimality, inquiring whether there is a concept of optimality that captures the concerns that underlie the emerging interest in sustainability. I suggest that the essence of sustainability lies in three points: a treatment of the present and the future that places a positive value on the very long run, recognition of all the ways in which environmental assets or natural capital contribute to economic well-being, and recognition of the constraints on economic activity implied by the dynamics of environmental assets. Embodying these concerns in a concept of optimality has important implications for patterns of optimal resource management over time, for the valuation of environmental assets, and …