Whither economics? From optimality to sustainability?

Abstract

Environment and economy interact. Most economists and economic policy makers have tended to neglect this interaction as 'external' to mainstream market economics. The question is whether environmental externalities have reached a level where they overwhelm optimality and efficiency in resource allocation. Sustainability in growth and development has been advanced as a criterion for dealing with the social costs of environmental impacts. The article examines how this criterion can be operationalized for assessing the significance of environmental concerns in economic analysis and policy. Indicators of economic and ecological sustainability are defined and compiled for selected countries. Based on these indicators, operational paradigms of 'eco-nomics' and 'sustainable development' are advanced.