What forms of rationality for sustainable development

What Forms of Rationality for Sustainable Development?

SYLVIE FAUCHEUX* GkALDINE FROGER

JEAN-FRANCOIS NOEL University of Paris

Abstract: This article aims to help the decision-making process in the matter of sustainable development. The real dividing lines between different analyses of sustainable development are drawn on the basis of two methodological questions. The first concerns the effective inclusion or exclusion of the ecological dimension; the second concerns the choice of a rationality hypothesis. From this perspective, we explain that neoclassical theory and conventional ecology are both insufficient because they rest respectively on an economic or ecological substantive rationality. Then we posit that the analysis of the London School constitutes an attempt to combine the ecological and economic dimensions of development. However, this approach does have its limitations, ultimately using an hypothesis of expanded economic rationality that nevertheless remains basically substantive. Last, we show how an “ecological-economic” approach based on a procedural conception of rationality also employing economic- and energy-based valuation methods seems to cover more comprehensively the issues of sustainable development involving the coordination of diverse rationalities and diverse dimensions of sustainability.

* Direct all correspondence to: Sylvie Faucheux, UniversitC de Versailles St. Quentin en Yvelines and

Centre Economic-Espace-Environnement, URA CNRS No. 919 METIS, UniversitC de Paris I PanthCon- Sorbonne, 90 rue de Tolbiac, 75013 Paris, France.

The Journal of Socio-Economics, Volume 24, Number 1, pages 169-209 Copyright @ 1995 by JAI Press Inc. All rights of reproduction in any form reserved. ISSN: 1053-5357

170 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. l/1995

INTRODUCTION

Support for “sustainable development” and what this term initially signified’

grew following the publication of the Brundtland Report (WCED, 1987).

Nevertheless, there is considerable divergence as to the exact conceptual and operational content of the term. Because sustainable development itself is

multidimensional and rooted, as pointed out by Daly (1987), in three separate

economic, social, and ecological fields, it has generated a degree of confusion and been used as a “black box” containing disparate elements. Authors such

as Pezzey (1989) and Pearce, Barbier, and Markandya (1989) have found over

20 different meanings for the term in various literature and have subsumed them under two major categories: one primarily economic and the other ecological. Similarly, Victor (1991), in his examination of the links between the theory of capital and the concept of sustainable development, distinguishes four schools

of thought dealing with this question: the Neoclassical School, the London School under Pearce, the Post-Keynesian School, and the Thermodynamic School created by Boulding (1966, 1978) and Georgescu-Roegen (1971).

Our intention is to show that the real dividing lines between different analyses

of sustainable development are drawn on the basis of two methodological questions. The first, already abundantly dealt with in the available literature,

concerns the effective inclusion or exclusion of the ecological dimension; the

second concerns the choice of rationality hypothesis. Today, this previously implicit aspect of the problem lies at the heart of work on the subject. Barde

(1992) supports economic rationality. Martinez-Alier (1991) examines the

respective relevance of both economic and ecological rationality as the basis for sustainable development. Btirgenmeier (1990) underscores the need to look beyond the frontiers of economic rationality. Perrings (1991) advocates a “reserved rationality” analogous to “bounded rationality” described by Simon

for decision making in conditions of uncertainty. Pearce and Turner (1990) even allude to the need for a hypothesis of procedural rationality.2

It is from this perspective, and by drawing on research into the labor market (Favereau 1989a, 1989b, 1991) and firms (Williamson, 1985) that we illustrate the methodological positions relevant to the concept of sustainable

development. These are shown in Figure 1, using two axes. On the vertical axis lie the criteria for sustainability, with the two outer poles

representing economic sustainability and ecological sustainability, respectively. The midpoint on the vertical axis represents the point of equilibrium at which both economic and ecological sustainability are given equal weight.

The horizontal axis charts the rationality used for decision making, with the two outer poles representing substantive and procedural rationality, respectively. This follows Simon’s assertion (1964) that a distinction must be made between the general notion of rationality as an adaptation of available

What forms of Rationality for Sustainable Development? 171

Ecological sustainability

Conventional ecological approach

0

London School approach (Modified model)

0

Substantive rationality 4

London School approach (Existing model)

a

Neoclassical approach

0

Ecological-economic approach

sustainability

Figure 1

means to ends3 and the various theories and models putatively based on it but actually based on a rationality which is either substantive or proceduraL4 This terminology can be used to distinguish between the rationality of a decision considered independently of the manner in which it is made (in the case of substantive rationality, the rationality evaluation refers exclusively to the results of the choice)’ and the rationality of a decision in terms of the manner in which it is made (in the case of procedural rationality, the rationality evaluation refers to the decision-making process itself).

We thus note, first, that neoclassical theory and conventional ecology are insufficient, due to their respective emphasis on economic or ecological sustainability alone. We need to examine the respective bias and reductionist tendency of such analyses, which rest on a substantive conception of rationality. Second, we posit that the analysis of the London School, whose contribution to the debate is considerable, constitutes an attempt to combine

172 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 1 /1995

the ecological and economic dimensions of development. However, this

approach does have its limitations, insofar as it comes up against the

fundamental problems of evaluating the stock of natural capital, ultimately

using an hypothesis of expanded economic rationality that nevertheless

remains basically substantive. Last, we explain how an “ecological-economic”

approach based on a procedural conception of rationality also employing

economic and energy-based valuation methods seems to cover more

comprehensively the issues of sustainable development involving the

coordination of diverse rationalities and diverse dimensions of sustainability.

We advance a number of assertions under this heading, even if procedural

rationality is now essentially a research program and has not yet a stabilized

character (Mongin, 1986; Favereau, 1989b).

THE FLAWS OF SUBSTANTIVE RATIONALITY FORMS AS THE BASIS FOR SUSTAINABLE DEVELOPMENT

In this initial part of our paper, we demonstrate that neoclassical analyses and

models of sustainable development fall within the paradigm of substantive

rationality and do not provide a sufficient means for reconciling the active arena

of the economic system with the renewal of the ecological system. The

neoclassical approach primarily emphasizes criteria of intertemporal

effectiveness guaranteeing the economic sustainability of development.

Conventional ecological analyses and models, for their part, also fall within

the paradigm of substantive rationality. They focus on determining criteria of

intertemporal stability guaranteeing the ecological sustainability of

development.

The Neoclassical Analysis of Sustainable Development: Consideration of Substantive Economic Rationality Alone

Arrow (1974) points out that the neoclassical approach is based on two basic

premises:

l The coordination of individual behavior under the influence of market forces; and

l Individual decision-making behavior, whose rationality is optimization.

These premises lie at the very heart of the various neoclassical conceptions of sustainable development and can therefore be placed in the “south-west” quadrant of Figure 1. This position excludes the environmental dimension and

the implementation of a substantive economic rationality in the strict meaning

of the term.

What forms of Rat~o~aiit~ for Sus~ajnab~e Development? 173

An Exclusively Economic Sustainability

The neoclassical analyses of sustainable development-whose supporters revealingly prefer the term “sust~nable growth”-are based on s~t~nab~ty in terms of Pareto’s optimum. Growth is termed sustainable if, and only if, the increase in welfare for present generations does not involve a reduction in welfare for future generations. There are models for sustainable growth (see Appendix 1) that use this type of analysis6 They differ from traditional models for optimal growth in that some environments variables, such as natural resource depletion and/or pollution, are included in the objective functions (collective utility function) or in the production functions.7 However, the ultimate sustainability criterion, derived from the “Hicksian” concept of capital (Common & Perrings, 1992), resides in the maintenance at constant levels over time of a total stock of capital, or consumption potential. This type of criterion requires restrictive hypotheses when it comes to the inte~ention of technical advances such as “backstop technology” for maintaining the productivity of the resource base (Howe, 1979),’ and also when it comes to the possibility of an infinite substitutability between the constituent components of the total capital stock. Substitutability between the different arguments of the utility function (consumption and en~ronment~ goods) assume that all are equivalent. Thus, environmental degradation could be compensated for by a rise in the consumption of manufactured goods. Substitutability between production- function arguments (technical capital and natural capital) is guaranteed when the elasticity of substitution between capital and resources remains constant, an inherent property of production functions of the Cobb-Douglas and CES type used in neoclassical models of sustainable development (Dasgupta & Heal, 1979; Stiglitz, 1974, 1979; Solow, 1974a, 1974b, 1986). Environmental concerns are introduced here in a purely formal manner. (For a detailed analysis of neoclassical models of sustainable development, see Faucheux & Noel, 1995.)

The lack of consideration for ecological sustainability is underscored by the confidence placed in the role of market forces and their ability to serve as an appropriate guide for the best possible use of natural resources and the environment. This hypothesis is present in the heart of sustainable growth models which put emphasis either on natural resources or on pollution, but not on these two aspects simultaneously.

In the case of natural resources, neoclassical analysis employs the egalitarian principles of Rawls ( 1971)9 for defining the conditions under which real consumption can be maintained at a constant level over time in spite of the depletion of exhaustible resources. This is done through the efficient allocation of resources according to Hartwick’s rule (1977,1978), an extension of Hotelling’s rule (1931). The latter specifies that a necessary and suf~cient condition for guaranteeing optimal resource exploitation is for the net cost of these resources to rise at a rate equal to the rate of interest.” It posits as its goal the simple

174 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. l/l 995

maximization of profits within a limited time frame, not the mutation of the time period at the end of which the resource will be totally exhausted (Faucheux, 1990). Hartwick’s rule, on the other hand, specifies that profits from the exploitation of an exhaustible resource must be invested in renewable assets so that the latter can be substituted for the “natural resource inputs” in production. Here we see the “Hicksian” concern for rn~nt~~ng a constant resource base through substitutability of capital components. However, Hartwick’s rule is no more relevant than Hotelling’s rule for “ecological” sustainability rooted in the physical nature of the environment. Both depend on pricing for the optimal intertemporal allocation of resources. It is, therefore, obvious that models of sustainable growth (see Appendix 1) based on these principles see sustainability only in the purely economic meaning of the term.

When it comes to pollution, the neoclassical economic approach advocates the internalization of external effects for determining the optimal level of pollution. The latter is attained when the marginal cost of reducing a polluting emission is exactly equal to the marginal cost of the damage caused by this pollution. Pearce (1976, 1988b) demonstrated the limits of this process of internalization when it attempts to establish an environmental norm, since the level of pollutants may very well exceed the environment’s absorption capacity. All concern for ecological sustainability is thus totally absent from the neoclassical models of sustainable growth containing an environmental quality or pollution variable in the utility function (see Appendix 1).

In view of the preceding, neoclassical analyses of sustainable development demonstrate that prior choice of the environmental constraints to be respected is not necessary. They are in a sense codetermined by the various market forces involved, with the latter determining achievement of an economic optimum supposed to represent both equilibrium and the ecological standard to be met. The sovereignty of the economic sphere, expressed through the regulatory role of market forces, and the hypotheses of substitutability and technological progress serve as a means to evade environmental constraints that are always relative in any case, and never absolute. We thus come back to the conclusions of the standard theory of growth according to which only capital and labor are 1i~ted.l’ No criterion of specially ecological sustainability is really included in the neoclassical analysis of sustainable development. It does, however, underscore a certain number of criteria for economic sustainability (Victor, 199 1):

l The degree of substitutability (measured by the elasticity of substitution) between technical capital and all natural resources;

l The importance of technological progress; and l Prices, whether real-market or “shadow.”

We have, therefore, placed this type of analysis at the bottom of the vertical axis in Figure 1.

What Forms of Rationality for Sustainable Development! 175

A Substantive Economic Rationality

The neoclassical approach to sustainable development employs the analytical tools and a specific theoretical language rooted in the paradigm of substantive rationality (Froger & Zyla, forthcoming). It specifies that individual or collective rationality is identified with constrained maximization of an objective function. This reflects Simon’s analysis of substantive rationality, in which the emphasis is placed on finding the best solutions through constrained optimization.”

According to Favereau (1989a, p. 278), “Rationality-Exclusively-Through- Optimization reflects the choice of a substantive conception of rationality at

the expense of a procedural conception.” This substantive rationality, which supports the neoclassical analysis of sustainable development, has not got weaker in that the solutions provided are first-best optima. The agents are

assumed to possess perfect information on which to base their decisions, even when environmental issues are involved. We have also seen above that no constraint of environmental renewal is placed on the exercise of economic

reasoning. All internal and external constraints unrelated to the “nature of things” are thus excluded.13 This type of analysis is concerned only with substantive economic rationality, and we have, therefore, placed it to the left of the horizontal axis in Figure 1.

To sum up, we believe that substantive economic rationality is relevant only to purely economic sustainability. As we have seen above, the primary emphasis is on the optimization of the objective function, in this case on the utility

function, without any real environmental constraint. Here, we have the unidimensional economic approach to sustainable development. We have, therefore, placed the neoclassical approach to sustainable development in the

“south-west” quadrant of Figure 1.

The Conventional Ecological Analysis of Sustainable Development: Consideration of Substantive Ecological Rationality Alone

The conventional ecological view of sustainable development adopts a symmetrical position’4 to that of standard economics. The exclusive consideration of ecological criteria of sustainability, and the implementation of a substantive ecological rationality in the strict meaning of the term, are

characteristic of this approach. Furthermore, Martinez Alier (1992) might lead us to wonder whether attempts to replace an economic rationality with an ecological one are not also destined to fail.

An Exclusively Ecological Sustainability

More often, conventional ecology considers the relation between Man and

Nature with a biocentric ethic perspective: it emphasizes the fact that Nature must be preserved for itself and not to satisfy the welfare of future generations.


The “deep ecology” trend” that shares this position is a reaction to the environmental approaches developed by neoclassical economists. It disputes the concept of Nature as a virtually inexhaustible source of resources and a bottomless pit for the disposal of industrial wastes. It also disputes the blinkered and mindless optimism exhibited by standard economic analysis with regard to technological progress and substitution possib~ities (Swaney, 1987).

Furthermore, the deep ecology trend questions the anthropocent~sm characteristic of economics in general, such as the utilitarianism basic to neoclassical theory. A debate on the existence value, or intrinsic value, lies at the center of this opposition. Intrinsic value-that is, the value of an environmental component taken in isolation from the use it may be put to, now or in the future-is a biocentric concept recognizing ethical obligations to ecosystems as such. The only valid basis for this value must indeed be that all nonhuman elements become the subjects of right? (and not simply the objects of human rights).17 Unlike the anthropocentric approach, according to which a concern for conserving natural resources is admitted only insofar as it is useful to humanity, a biocentric approach considers Nature, all species (animal, plants, etc.) and ecosystems, as having a right to autonomous existence, unaffected by utilitarian considerations. Thus, “since the basis of the right to existence for nonhumans is not utilitarian but ethical, sustainable development is thus defined as preserving other forms of terrestrial life from harm” (Hatem, 1990).

This view, which is essentially centered on Nature, underlies many conventional ecological models. l8 It is also present in Lovelock’s works concerning Gdia’s hypothesis (1979, 1989). The ecosphere is personified under the name of Gdia, and for Lovelock it is a huge, self-regulating “living body” capable of reacting, as it has done since its origins, to exogenous shocks, including those inflicted on it by the behavior of humankind. humankind, while not necessarily excluded from it, does from a biocentric perspective appear as only one component among many and, as such, the human race is subject to the “great law of Nature.“lg In this conception, ecological rationality is exterior to human rationality and dominates it. Like all systems, Gala seeks to perpetuate itself in time, and will do so even if humanity has to be eliminated in the process.20

Another example where Nature dominates Man can be given by the theory of “ecological planning”described by McHarg during the 1960s (McHarg, 1966, 1969). It represents technology-based attempts to “uncover Nature’s plan” such that the goal is to “combine the tactics and strategy of mankind with those of Nature”(O’Riordan, 1971). This is the idea that certain planners-for example, the enlightened despot dear to the physiocrats-must respect the optimal plan dictated by Nature. This refers implicitly to a hierarchical superiority of the natural order over the desired human order. As Commoner wrote (1972): “Nature knows best.‘“’ In respect of these elements, it seems that conventional

What Forms of Ratjonality for Sustainable Development? 177

ecology (with a biocentric view) is as reductionist as neoclassical perspective but in a symmetrical way, particularly when it attempts to define economic policy and technological choices in regard to ecological considerations alone (Labeyrie, 1984).

In excluding all economic and social considerations of sustainability, it admits only criteria of ecological stability. We have, therefore, placed this approach at the top of the vertical axis in Figure 1, where only the environment is considered.

From the Ecologicaf Optimum to a Substantive Ecological Rationality

If we follow Deleage (1991), economics has always been the principal reference to ecology. Thus, ecology may be considered as the “economics of Nature” and it may use the same analytical inst~ments as neoclassical theory.22 Few authors have given importance to concepts of strategy, efficiency, or optimum, In their models, they also attribute to Nature a rationality which is as substantive as economic rationality.

Ecological models are used as analytical and decision-making aids for determining ecological sustainability. Paradoxically, they are methodologically very similar to neoclassical models of sust~nability based on substantive economic rationality. For one thing, in both cases the solutions, or rather the norms of sustainability, derived from the models, are the result of an optimization process under constraint (Amir, 1987; Shogren & Nowell, 1992). Obviously, objective functions and constraints differ. For example, from the ecological point of view, biological structures are assumed to be optimal in terms of the energy needed for their construction and maintenance (Rosen, 1967). It could be noted that the validity of optimization has been as hotly debated in ecology as it has in economics (Cody, 1974; Maynard Smith, 1978). It has been posited that optimization could not be applied in ecology, even as a metaphor for the forces of natural selection, because its effective mechanism is not known. In support of this attitude is the fact that in changing and erratic environments, optimization cannot occur, and thus no clear direction can be observed in the dynamic changes of populations. Some authors have decided to call on the “as if” formulation of Friedman (1953) as the basis for a principle of ecological optimization in unstable environments (Amir, 1987). Their essential argument is that the process of selection in any case encourages efficiency and is, therefore, comparable to a kind of optimization, Ecology thus also employs the notion of “optimum,” although the meaning of the term is not as clear in this context as it is in economics.23 Let us add, the use-which some consider abusive (Labeyrie, 1984)-of the notion of strategy, effects a progressive slide of the concept of the optimum toward that of ecological rationality.

i 78 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. l/1995

For example, Mac Arthur and Wilson (1967) have proposed a model for fitting population strategy into a neo-Darwinian schema: “For living beings, strategy consists of sharing all available resources in ay1 optimal manner throughout their struggle for existence among the organism’s major functions, which are growth, survival and reproduction” (Mac Arthur & Wilson, 1967, emphasis added). These two authors introduce genetic considerations in order to explain how natural selection leads populations to adopt two differing principles of resource optimization. This is the celebrated distinction between the “r” and the “K” strategies.24

This is actually not far from H.T. Odum’s assertion that demographic strategies within an ecosystem are the result of optimal resource-sharing between the different needs of the organism: to acquire resources, grow, m~ntain and repair tissues, provide defence against unfavorable conditions, and reproduce. If we allow that all organisms have only a limited amount of energy at their disposal, we see that natural selection can tend to optimize methods of resource acquisition and the sharing of these resources among the various basic needs of the organism. Here, the idea of interdependence is connected with optimization and efficiency. Thus, Odum attempts to extend the laws of thermodynamics by adding the principle of maximum potential proper to systems that function in states of disequilibrium-that is, living systems.25

Various optimization strategies used by the individuals of a given species within an ecosystem constitute a genuine ecological rationality in a substantive way. Under these conditions, it seems that models based on optimization lie on ecological substantive rationality. We have, therefore, placed conventional ecological analysis of sustainable development on the left side of the horizontal axis in Figure 1.

In addition, we also see the concepts of ecology extended beyond the sphere of natural exchangesz6 An example is given by H-T. Odum (197 l), who develops an “overriding” conception of ecology which, in his view, can be used with the help of the energy measurement for the scientific explanation of everything in the natural and social world: the “science of science” (Labeyrie, 1984).27 The reductionist aspect of this approach has repeatedly been underscored.28 In this condition ecological rationality cannot alone either determine poIitica1 decisions or be a substitute to economic calculation (Martinez Alier, 1992).

Last, substantive ecological rationality appears to be indivisible from the attitude of exclusive ecological sustainability, Sustainable development is here seen in terms of unidimensional ecology. In this context, we have placed the conventional ecological approach in the “north-west” quadrant of Figure 1.

To conclude this first part: we have seen the limits of an “economics without ecology” and of an “ecology without economics.” They both rely on a unique and exclusive substantive rationality that they extend beyond their areas of initial validity. This being so, they explain only a single dimension of sustainable development and, thus, constitute reductionist analyses. In order to reestablish

What Forms of Rationality for Sustainable Development? 179

a genuinely multidimensional analysis of sustainable development, we must consider where we should place economic and ecological rationalities.

THE FLAWS OF EXPANDED SUBSTANTIVE RATIONALITY AS THE BASIS FOR THEORIES OF SUSTAINABLE DEVELOPMENT:

THE LONDON SCHOOL EXPERIENCE

One proposed solution to the problem would be to say that a nonreductionist analysis of sustainable development should include ecological rationality as a limiting factor on other forms of rationality, without considering it as dominant and exclusive. This would involve setting limits on the application of some decision-making rules: if we can be certain of the effects of a given activity (pollution from a factory, for example) on the homeostasis or the carrying capacity of an ecosystem, the capacity of the ecosystem to absorb the pollutant would represent the “ecological constraint” to be respected “subject to this constraint, conventional policy analysis techniques (such as cost-benefit analysis) could then be used to identify the preferred course of action” (Drysek, 1983, p. 9).

Page (1977) also asks for the application of a “conservation criterion” on the flow of natural resources entering the economy, in order to guarantee the survival of the resource. Once this criterion is satisfied, he then proposes applying the usual criterion of economic rationality-that is, maximization of the discounted present value.

When ecological constraints are recognized, economic rationality is then expanded. We will see below to what degree the analysis of sustainable development advocated by the London Schoo12’ succeeds or fails to respond to such a task.

An Attempt to Integrate Economics and Ecology

The approach to sustainable development advocated by Pearce and his colleagues goes beyond the conventional analyses as described above. First, it emphasizes preservation of the environment in association with meeting the demands of economic growth. Second, it goes beyond the restrictiveness connected with all substantive rationality and adopts an enlarged economic rationality.

Coexistence between Economic Sustainability and Ecological Sustainability

Supporters of the London School, in contradistinction to the neoclassical theoreticians, believe that maintaining overall capital at constant levels is not a necessary or sufficient condition for guaranteeing ecological sustainability. By extension, they attempt to evaluate the advisability and worth of conserving a minimum stock of natural capital. The reasons they invoke to justify their approach stem from doubts concerning some of the formal arguments and


rezoning of neoclassical analysis as pe~aining to the en~ronment. One such is the substitution relationship between technical and natural capital. It is not always possible to substitute technical capital for natural capital:

l First, unlike economic or technical capital, natural resources are mult~unction~30 and

l Second, all capital incorporates natural resources which do not have the same status as the other production factors since, unlike the latter, they cannot be produced.3’

In order to integrate the need to conserve a minimal stock of natural capital,32 London School authors adopt an approach based on the work of Baumol and Oates (1971). The method designed by these two authors for pollution management can also be applied to natural resources management. In both cases, environmental pollution or consumption norms are determined in physical terms, independently of economic optimization. Afterwards, an effort is made to achieve them at the lowest economic cost.

These features are found in the sustainable development model designed by Barbier and Markandya (1990), which is described in detail in Appendix 2. These authors integrate an absolute ecological constraint (X2 $), fixing the minimum quality of the environment below which the entire socioeconomic system could disappear. The objective of sust~nab~ity is expressed through three categories of ecological constraints that condition the utility function. The first constraint specifies that use of natural resources must not exceed the renewability rate. The second, that exhaustible resources must be extracted at a rate allowing for their replacement by renewable resources. And, third, that waste emissions must be lower than the environment’s capacity for absorbing them.

By contrast with the neoclassical models of sustainable development, which, as we have seen, codetermine environmental norms and economic optima, the London School model is designed to incorporate the problem of compatibility between economic optimization and renewal of the natural system. Constraints relevant to the renewal of the environment defined exogenously are thus imposed upon purely economic reasoning. This analylsis thus focuses on the idea of conserving nature as a primary objective.

An initial Step Toward Abandoning Substantive Economic Rationality

The field of constraints applied to optim~ity criteria of maximiation of discounted future utility is thus expanded. It is enlarged to include quantitative constraints defined exogenously, and not contingent on the “nature of things.” Hence, the solutions provided by optimization procedures become second-best optima.33 The London School approach goes beyond the strict substantive rationality that ordains that only first-best optima can be determined.

What Forms of Ratjona~jty for Susta;nab/e Development? 181

This last aspect is heightened when we examine factors capable of influencing decision making for environmental issues. Considering the natural environment as a source of “surprise” as described by Schackle (1969),34 or as a source of “novelty” as described by Georgescu-Roegen (1971),35 the London School authors emphasize agents’limitations when it comes to collecting and processing information relative to the role of the environment as a support for economic activity, and to the effects of economic activity on the environment. Thus, no individual is capable of mastering all pertinent elements needed for making a correct decision; none can be aware of all available options, nor anticipate all the consequences involved in choosing one of them.

In decision-making theory, internal constraints such as these make it necessary to reconsider the traditional criteria for exploiting the environment. As described by Barbier (1990, p. 10):

For example, where conventional criteria might justify the cutting down of a forest, alternative criteria might justify preservation if the expected loss of value resulting from the decline in genetic diversity, soil quality, ecological stability, natural beauty, etc., were considered too great. In other words, only by looking at the total economic value provided by all the functions of an en~ronment~ asset is it possible to weigh the en~ronment~ benefits of preservation foregone against the net benefits of development undertaken.

Thus, the standard decision-making criterion based on maximization of the present value of expected utility must be, according to the London School, extended to cover other criteria such as the option value (Weisbrod, 1964)- which expresses ~llin~ess to pay for deferred use of the en~ronment-and the bequest and existence values (Krutilla, 1967)-which express willingness to pay implying a kind of altruism independently of present or deferred use of the environment (see Table 1).

By including in their analysis the concept of total economic value-which is the sum of all use, option, bequest, existence, and vicarious values- supporters of the London School also include the uncertain, the irreversible, the intergenerational, and values unconnected with utility. By doing so, they again tend to move away from substantive economic rationality, if Favereau’s option value analysis (1989b) is correct and if we consider that the existence value, described in the previous part, is dependent on an ecological rationality.

Table 1

Use Value Non-use Value

Agent i Other Agents Agent i Other Agents

Present

Future

Use value

Option value

Vicarious value

Bequest value

Existence value

Bequest value


The two categories of external and internal constraints conditioning the utility function in the London School model perforce modify the decision-making process as expressed in the neoclassical models of sustainability based on purely substantive rationality. In general, the inclusion of all these elements places the London School approach to sustainable development in the context of a bounded ration~ity,36 allowing for the coexistence of both ecological and economic criteria where sustainability is concerned. The term “bounded rationality” is nonetheless an ambiguous one, since it “can refer either to the idea of a rationality weakened in comparison with the full rationality exhibited by the maximizer of expected utility, or to the idea of a rationality that is as funny achieved as that of the classic model, but which in contrast to the latter includes effective limitation in the means of choice, specifically the means of calculation” (Mongin, 1984, p. 26).

A Concept Insufficiently Broad to Cover Both Ecological and Economic Sustainability

In view of the preceding arguments, the London School analysis of sustainable development takes into consideration ecological sustainability and weakens the hypothesis of substantive economic rationality. Nevertheless, it poses a number of problems that limit its applicability.

A i;rn;te~ /~kegra~ion of E co~ogjca~ Susrai~ab;~;~y

The London School has clearly demonstrated the value and importance of conserving a stock of natural capital, but it has not given sufficient attention to the problems of how this stock of capital should be measured. Pearce and his team consider that the physical measurement of natural assets is problematic because of the problem of mixed physical units. It is true that it is difficult to aggregate physical quantities expressed in different units of measurement.j7 For example, if an existing stock of wood increases as oil reserves are depleted, how can we say whether the total stock of natural assets has increased, diminished, or remained stationary? This problem is very similar to the one that affects capital me~urement, the basic criticism of the Cambridge School against standard analysis.38

This is why supporters of the London School fall back on monetary evaluation of natural capital as a means of encompassing disparate natural assets.

The traditional methods for identifying individual or collective preferences based on a willingness to pay for them is one way to evaluate total economic value, by attributing “shadow prices” (Pearce, 1991; Bateman, 1993). Paradoxically, compared to its initial intention, the London School analysis of sustainable development ultimately comes back to the methodology by which external effects are internalized, and it suffers from the same limitations.


In our opinion, there is a degree of circularity in the London School approach. It certainly emphasizes the need to conserve natural assets and formulates

constraints for environmental renewal. In this, it adopts the approach of Baumol

and Oates, who separate the environmental objective determined in physical terms from the means for achieving it. The basic reasoning here is the

impossibility of determining in monetary terms-for example, by identifying preferences-the environmental costs, that is, one of the two cost curves needed

for the internalization of external effects. However, faced with the problem

represented by evaluating environmental constraints in homogeneous physical

terms, authors belonging to the London School ultimately express them in

monetary terms.

This approach uses only economic criteria to evaluate environmental

standards and determine the most effective means for achieving them. It assigns

a social value indicator to the environment by assessing total economic value,

making it possible to evaluate environmental goods and services in a more satisfactory way than that proposed by neoclassical analysis, based only on the

direct use value of environmental goods and services. However, this method

of taking the environment into account is insufficient. Because of this

ambivalence, we have placed the London School halfway along the vertical axis

in Figure 1.

An Oscillation Around Substantive Rationalities

The sustainable development analysis and model proposed by the London School belongs, as explained above, in the context of bounded rationality.

However, Mongin’s study on “search models” (1986) underscores the

ambiguous nature of an optimization approach to bounded rationality

representing an attempt “to bring it within the compass of rational calculus”

(Simon, 1978, p. 10). On the one hand, the underlying thrust of an approach such as this becomes circular when the agent is assumed to exhibit optimal

awareness of the difficulties he is attempting to optimize. What actually happens

is that, following an initial optimization process, the agent will perceive previously missed costs and will then integrate them into a second-best optima;

then, after the second step has been completed, he will again perceive previously missed costs and integrate them into a third-best optima . . . and so on, in a

total process of “infinite regression.“On the other hand, no approach optimizing

the bounds of rationality will always succeed in replicating the basic idea of deliberation followed by a decision, since it cannot include all the choices involved, but only the final result of the process. Last, “Although it is true that

traditional modelling is easily adaptable to the abstract notion of bounded

rationality, it is far from certain that it can produce an interpretation that is methodologically and logically satisfying” (Mongin, 1986, p. 557).


In our opinion, the optimization theory of bounded rationality advocated by the London School is not based on a procedural analytic process. In fact, the underlying optimization is not conditioned by properly specified environmental constraints, and these might considerably weaken its applicability.

This once again reflects the ambiguity of the London School approach. In one sense, it is in no way based on substantive rationality in the strict sense of the term, especially when it attempts to integrate constraints that would limit “rationality-exclusively-through-optimization.” But in another sense, it does not fundamentally depart from it either, since when confronted with the difficulties of determining and evaluating the representative environmental norms for ecological sustainability, it advocates the use of economic criteria, and here it draws on a “substantive” conception of economic rationality. Because of this ambivalence, we have placed the London School midway along the horizontal axis in Figure 1.

If environmental constraints could be expressed nonarbitrarily in homogenous physical terms, they would weaken still further the hypothesis of substantive economic rationality presented by this model. There would then be a connection between economic rationality (because the model is a model of optimum growth) and ecological rationality, since the environmental constraints are generated by an ecological rationality. These constraints, however, being drawn exclusively from ecological rationality, would be so restrictive that they could preclude any economic growth whatsoever, as do the conclusions of Forrester’s model used by the Club of Rome.

In actual fact, the London School sustainable development model oscillates around two possibilities:

l Either, the constraints are exclusively determined in economic terms and hence we are dealing with an expanded substantive rationality tending toward a substantive economic rationality;

l Or, they are exclusively determined in physical terms and hence we are dealing with an enlarged substantive rationality tending toward a substantive ecological rationality.

Because the London School model does not provide a means for placing the two rationalities on the same footing, it falls between two camps: halfway between substantive rationality and procedural rationality, and halfway down the road toward the integration of ecological criteria of sustainability. This is why we have placed this model, as it is, in the “south-west” quadrant of Figure 1, and also placed it, as it might be, in the “north-west” quadrant toward the center of Figure 1.

It would appear that the London School tends to go beyond the approaches presented in the preceding section, by integrating constraints implied by


environmental renewal into an economic growth analysis. Although this attempt has stimulated undeniable advances on the conceptual level, it remains flawed. We believe it is flawed because the initial objective of combining the economic with the ecological rationality has ultimately been forsaken in the existing model. This has facilitated the expansion of an economic rationality to cover the entire economic-environmental interface. This economic rationality is definitely weakened by the presence of additional constraints due to the opening of the economy onto its natural environment (in other words, onto the inclusion of a genuine economic-environmental interface), but we are still in the presence of a single rationality applied to the management of multidimensional phenomena.

TOWARD AN ECOLOGICAL-ECONOMIC APPROACH TO

SUSTAINABLE DEVELOPMENT BASED ON PROCEDURAL RATIONALITY

Thus, the key issue for the implementation of genuine analyses and models of sustainable development seems to involve simultaneously and equitably taking into account different rationalities in order to achieve a better comprehension of the various dimensions of sustainability. We argue in this section that an approach to sustainable development based on procedural rationality in the Simonian sense allows for the articulation of this type of differentiation between the various forms of rationality. After setting out how such an approach can be implemented, we examine the premises of a methodology, linked to Ecological-Economics,39 capable of providing a decision-making aid where sustainable development is concerned.

Implementing Procedural Rationality

in a Context of Sustainable Development

The point at issue here is to justify the use of procedural rationality indecision- making processes regarding sustainable development. We also address the problems of determining and evaluating the intermediate subgoals of ecological sustainability and the problems of choosing a suitable institutional framework.

Why Procedural Rationality?

Favereau (1989b) demonstrates that uncertainty itself justifies the shift from substantive rationality to procedural rationality. Procedural rationality makes it possible to limit the irreversibility of decisions by allowing future room for manoeuvre, which is the basis of the “precautionary principle.‘40 The more uncertain a decision, the more likely it is to be irreversible. Beyond a certain threshold, uncertainty and irreversibility justify a common reorientation toward the search for procedural rather than substantive solutions. If it is no longer possible to construct subjective and objective probabilities in an uncertain


universe, the determination of the decision giving the best result ex ante in a given domain of choice loses its appeal when compared with the determination ex ante of the “right” domain of choice-that is, the domain of choice closest to the one observed ex post. Thus, it is not a matter of finding the “best”decision ex ante but ensuring that the “best”method has been used to prepare the decision making.

It should be added that any policy choice concerning sustainable development faces not only uncertainty for which it is not possible to give objective or subjective probabilities, but also complexity, irreversibility, and multidimensional criteria of an ecological, economic, social, legal, and political nature (O’Connor et al., 1995). Simon recommends the use of procedural rationality for decisions of this type, writing that domains in which a theory of procedural rationality is useful “are the domains that are too complex, too full of uncertainty or too rapidly changing to permit the objectively optimal action to be discovered and implemented” (Simon, 1978, p. 504). It is particularly pertinent to our argument to note that the examples given by Simon of such domains include environmental problems such as acid rain and climate change (Simon, 1991, p. 267).

Thus, it is entirely appropriate to seek in procedural rationality the basis for an analysis of sustainable development that is not open to criticisms liable to be made of the various approaches put forward so far.

Simon lays great emphasis on the method that he defines as “satisfactory choices” rather than “optimal choices.” The point is no longer to choose the optimal solution, whatever its underlying rationality, but to identify a satisfactory solution from the various possible options deriving from different criteria . Application of this “satisficing” principle shows that the requirement of sustainability does not need to be locked into an optimization approach; rather, it should correspond to a minimum standard of satisfaction.

The implementation of procedural rationality may imply the replacement of a global nonmeasurable objective with intermediate objectives or intermediate subgoals whose achievement can be observed and measured.4’ The Simonian principle of subgoals is particularly well-suited to situations in which the optimization problem data are not fully defined. It consists of determining goals and, in turn, seeking the most appropriate means for achieving them. Once these means have been identified, they are regarded as subgoals and the means for their achievement are allocated, and so on. As we can see, this method differs from those based on the substantive rationality of neoclassical models of sustainable development, where defining a goal and then considering the means for its achievement is suboptimal. We can note a “similarity” between this procedural method and the approach taken by Baumol and Oates (197 I), which aims to dissociate the goal from the most efficient means for its achievement.

Procedural rationality can be used to define sustainability subgoals on the basis of a global objective of sustainable development, which has proved to

What Forms of Rationality for Sustainable Development! 187

be impossible to measure directly. These subgoals can be identified using Daly’s “three filters” (1987). Hence, they can be ecological (or, more precisely, biophysical), social, and economic. Each of these subgoals may itself be broken down into several intermediate subgoals, which may take the form of standards to be met. The dissociation process stops precisely at the point where each intermediate subgoal becomes homogenously measurable. The decision maker then arbitrates between the different intermediate subgoals and chooses the solution that he feels to be the most satisfactory, taking into account economic, ecological, social, and other imperatives. He does not choose the optimal solution which, as it can only be optimal in one respect at a time (i.e., either ecologically or economically), is fundamentally unsust~nable. This is why the implementation of genuinely sustainable development means going beyond substantive rationalities, and even enlarged substantive rationalities, to a procedural rationality in which each subgoal obeying its own rationality is regarded as neither unique nor hierarchical but on an equal footing with the others.42

Some Difficulties to Overcome

As we have just seen, each intermediate subgoal must be observable and measurable, The London School ran into the problems of evaluating environmental standards that can be regarded as ecological intermediate subgoals. The problem here is whether “it would be possible to group together various ecological measures in a composite indicator that would show to what extent we are approaching a threshold beyond which the ecosystem undergoes a major change. Any such information would be highly useful to decision- makers” (Potvin, 1991, p. 11). This question begs that of the existence of a homogenous physical unit of measure suited to the ecological dimension. Energy-based valuation methods may provide a partial answer to this question, as they enable physical data to be rendered homogeneous independently of economic evaluations (Faucheux, 1990; Faucheux & Pillet, 1994). However, energy-based valuation methods cannot provide any indications for certain aspects of ecological sustainability, in particular biodiversity.

In neoclassical approaches to sustainable development based on substantive economic rationality, the market may alone act as a regulator. No need is felt for specialized institutions. Conventional ecological models, guided by a biocentric ecological rationality, imply a totalitarian dictatorship of the natural sciences.43 The London School’s approach, based on an enlarged economic rationality, falls back on the well-known methods of public economy and, as such, does not demand any real changes to existing institutions.

Institutionalists have shown that existing institutions, whether private or public, are deficient where management of the environment is concerned. Thus,


an approach to sustainable development following a procedural rationality calls

for the renewal of institutions (Btirgenmeier, 1992; Baranzini & Btirgenmeier,

1 992),44 since they ought to take account of multiple rationality criteria

(ecological, economic, social, technological, etc.) in order to articulate them in

a suitable manner.

It is our opinion that the institutionalist approach offers an interesting

approach for the implementation of a procedural rationality as a basis for the

analysis of, and formulation of policy for, sustainable development. A closer

look seems all the more necessary in that an institutionalist approach to the

environment has been taking form recently (Froger, 1993; Soderbaum, 1980,

1987, 1992; Dietz & van der Straaten, 1992).

The institutionalist approach to the environment is based on the following

three principles (van der Straaten & Opschoor, 1991):

1. Circular interdependence. Economic activities are not neutral with

regard to their natural, institutional, and cultural environments. Analysis should

incorporate the main environmental processes and take into account essential

biophysical laws (Klaassen & Opschoor, 1991).

2. Replacement of the utilitarian principle of the maximization of pleasure

with the principle of the satisfaction of basic human needs (Kapp, 1976). It

is possible for societal values not to cover individual values because the whole

cannot be reduced to the sum of its constituent parts (Passet, 1979). Society

as a whole has a much greater life expectancy than individuals; consequently,

it can promote a certain number of fundamental values and improve

environmental quality, for example, to a much greater extent than individuals.

In the context of sustainable development, it would appear to be necessary at

least to ensure the permanence of the decision structure needed for any future

decision making.45 It can be argued that ecological rationality-obviously in

its anthropocentric version-is a form of reason that is more fundamental than

the other rationalities: preservation of a life support system is clearly a

prerequisite for the continued existence of a society and its forms of

organization. This means that in the presence of “survivability” imperatives,

a decision maker obeying a procedural rationality must select the “satisfactory”

solution or solutions favoring intermediate subgoals derived from ecological sustainability.

3. Values as a whole cannot be reduced to the sole criteria of monetary evaluation. Other evaluation instruments must be designed and included in a hierarchical structure in order to regulate economic, social, and environmental behavior with a view to sustainable development. Moreover, this is the price

for the possibility of measuring the various goals that are vital to the

implementation of a procedural rationality, as explained above.


A Suggested Application: The “Sustainability Tree”

In our final section, we propose a method based on a procedural rationality capable of being implemented by suitable institutions. As we shall see, our method is still only partial for lack of an instrument giving consistent

quantification of social subgoals. Consequently, we have restricted ourselves to economic and ecological subgoals, which are broken down in both cases into intermediate subgoals. We use conventional methods of economic valuation to measure the former, and energy-based valuation techniques to measure the latter. Before demonstrating the complementarity of each of these intermediate

subgoals within a decision-making process obeying a procedural rationality, we examine in greater detail the determination or, more accurately, the

measurement of ecological intermediate subgoals using energy analysis.

Energy Analysis and the Determination of Ecological Intermediate Subgoals

As we have seen, the problem of heterogeneous physical units can be

partially resolved by using energy-based valuation methods. These methods then enable the evaluation of a certain number of environmental intermediate subgoals (in physical terms), via standards or indicators, that obey an anthropocentric ecological rationality. They thus afford the partial

achievement of one of the subgoals of sustainable development-namely, ecological sustainability.

Available EMergy Surplus: Reproduction of Natural Resources Interme- diate Subgoal

Available EMergy Surplus (AES) is defined as the difference between the amount of eMergy available and the amount of eMergy consumed by a system representing the total economy/ environment interface. Thus, it measures the available margin for a potential increase in the extraction of resources. The eMergy valuation technique consisting of norming all natural resources by their “solar transformity”(Pillet, 1990) is required here because, as we can see, it is necessary to measure the environment’s contribution of resources throughout the entire economy/environment interface. Ecological sustainable development requires AES > 0. One of the conditions for this is that

abstraction rates for all natural resources are never higher than renewal rates for renewable resources.46 We have found, by using the eMergy valuation technique and, more accurately, the solar transformity of natural resources, that it is possible to determine the necessary time for the reconstitution of each one. If AES < 0, it means that the system must import resources in order to continue its development. At a global level, AES is necessarily greater than or equal to zero.


veneration of ~in~rna~ Entropy: The minimization of Pollution Intermediate Subgoal

A Japanese school made up of economists such as Murota and Tamanoi’ and ecologists have grouped together in the “Society for the Study of Entropy” (Pillet & Murota, 1987) and a number of neo-Austrian authors (Faber, Niemes, & Stephan, 1987; Faber & Proops, 1990) recommend the use of an entropic valuation method to measure the impurities or, more accurately, the pollution potentialities contained by the various inputs used in production processes (Schembri, 1994). This gives what the authors describe as the “mixed-up entropy” of the substances under consideration, from which the total mixed- up entropy discharged by the production system into the environment can be evaluated. This measurement can then be compared with the biosphere’s absorption capacity. However, it would appear impossible with the current state of knowledge to obtain the latter information. For this reason, we prefer to recommend the use of minimal mixed-up entropy generation (Nm) under the best existing technolo~cal conditions. The difference between actual entropy (Ne) discharged into the natural environment and Nm (Ne-Nm) should then be as low as possible. The greater the difference, the less sustainable the economy/ environment interface system under consideration will be. Minimization of this difference may then constitute a minimization of pollution intermediate subgoal.47

Exergy Surplus: Energy Ef$ciency of the Economic System Intermediate Subgoal

The sustainability objective implies that the economic system must be capable of “enlarged reproduction.” Continued economic development on an enlarged basis requires, in energy terms, the ongoing production of an energy surplus (RS). What needs to be apprehended is the capacity of energy to generate mechanical work, implying the use of an exergy valuation procedure. The existence of a positive exergy surplus RS > 0 may appear surprising at first sight, precisely because the exergetic measurement of energy is based on taking into account existing losses in all energy conversions, and because energy efficiency in mechanical work is necessarily less than one, both in theory (Carnot’s efficiency) and in practice. The existence of a positive exergy surplus RS within the economy-that is, an exergy value for production greater than the value for energy consumption-can thus only come from outside the economy in the form of free energies capable of providing mechanical work: energies deriving from the environment and hence not taken into account (wind, water, etc.) (Faucheux & Vivien, 1992; Faucheux & Noel, 1992). A negative exergy surplus would indicate that there was insufficient mechanical energy in the system to permit economic reproduction. RS = 0 indicates a stationary situation where only simple reproduction without accumulation seems possible.


Ecological Sustainability Intermediate Subgoals in an Open Economy

In order to assess ecological sustainability in the context of an open economy, we need to integrate external balances calculated in terms of both exergy and eMergy into the definition of the intermediate subgoals outlined above. Clearly, a country can always obtain highly concentrated energy with a high retroactive capability through international trade-that is, at the expense of another country-so that the value of whose two indicators RS and AES may become positive even if they were negative the first time. The condition for sustainability in an open economy is thus that external balances, both exergy (SBe) and eMergy (SBr), should be positive (or negative) if RS and AES are positive (or negative).

The assessment of the ecological sustainability of an economic-environmental interface system derives directly from the simultaneous use of the various subgoals we have just outlined. They can be described in the following summary form. A system can experience sustainable development if:

l It produces an available eMergy surplus AES 10; a The quantity of entropy that it discharges tends toward the minimal

quantity (Ne - Nm); l It produces an exergy surplus (RS 10); and l Its external balance is in equilibrium or positive in terms of both eMergy

and exergy (EMEB 2 0 and RENEB 2 0).

In proposing intermediate subgoals defined using energy-based valuation procedures and following an anthropocentric ecological rationality, we have reduced the interface between environment and economy to a dual movement: the extraction of natural resources from the biosphere and the discharge of pollution into the same biosphere. Although there can be no doubt that these two dimensions frame the essential relations between economy and environment, the existence of other dimensions of ecological sustainability- such as space and biodiversity-should not be forgotten. As we have said before, they cannot be measured in physical terms using energy-based valuation procedures. Where these aspects of ecological sustainability are concerned, we are confronted again with the problem of the lack of homogenous physical measurements, preventing aggregation at a macroeconomic level. This means that the intermediate subgoals we have suggested constitute merely necessary, and not sufficient, conditions for ecological sustainability.

An Articulation of Economic and Ecological Rationalities

A decision maker implementing a sustainable development policy having regard solely to the intermediate subgoals outlined above would be obeying


Ecological Unsustainability Impossible Sustainable development

Increasing Entropy Ecological Unsustainability

4 _

FTef < PTmin

Arriving at Finitude

Ecological Unsustainability Impossible Sustainable development

an ecological rationality only. This implementation would totally eliminate the aspect of economic sustainability.

Consequently, if we consider the sustainability objective from the standpoint of procedural rationality, it would appear in the light of what has been said previously that intermediate subgoals, measured using energy-based valuation procedures, relating to ecological sustainability must be complementary with intermediate subgoals relating to economic sustainability.

As we have seen from the neoclassical and London School analyses of sustainable development, the standard economic indicators of sustainability are elasticities of substitution, technological progress, and prices.

l In a macroeconomic analysis with production functions integrating natural resources as a full factor of production, elasticities of substitution between these resources and the other factors of production can provide information on the sustainability of economic development. Elasticities of substitution between human-made capital and natural resources indicate the substitution potential between such capital and natural resources. However, as we pointed out in the first section, it is an indispensable condition that the production function be carefully chosen so as not to introduce any bias into the calculation of elasticities. Also, the information provided by these elasticities of substitution only concerns substitutability with regard to the technico-economic use of natural resources.


RS< 0

Economic Unsustainability Impossible Sustainable development

Economic Unsustainability Impossible Sustainable development

PTef c FTmin

-_IEKR~~ EKR<I

PTef b PTmin

c RENEB # 0

RSZO t V -~EKR~ I 1

Ecological and Economic Sustainability Possible sustainable development

Figure 2

As the work of the London school has shown, natural resources often fulfill multiple functions (both ecological and economic) and many of them cannot be replaced by human-produced capital. In particular, certain functions of natural resources relating to what we have previously called conditions of “survivability” have no substitute. For that reason, the information given in such cases by the value of elasticities of substitution cannot affect the result of computation of the available eMergy surplus (AES) but can affect the results of the exergy surplus (Rs) since the latter concerns only the economic functions of natural resources. Consequently, if Rs < 0 and if the elasticity of substitution between natural resources and capital (Ekr) is greater than one, economic sustainability is possible.

l Technological progress can not only counteract shortages of natural resources (as has been proved on many occasions in the past), it can also enable a reduction in the consumption of natural resources through improved efficiency. It can, therefore. affect the results of AES. Similarly, technological progress contributes to the fight against pollution. Thus, the generation of minimal entropy can be reduced by technological progress. Unfortunately, no satisfactory measurement of the relations between technological progress and natural resources exists at present (Faucheux, 1994). However, it is possible that research into endogenous growth will make progress in this respect. If such

194 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 1 /1995

measurements were available, it would be possible to define a minimum level

of technological progress required to counteract the depletion of natural

resources (PTminl), another to reduce entropy (PTmin2), and a third (PTmin3)

to combat the depletion of natural resources in their economic utilization. These

levels could then be compared with actual levels (PTel, PTe2, PTe3).

If the actual level of technological progress is superior to the minimum level

of technological progress required to counteract the depletion of natural

resources (PTl > PTminl), then even if AES < 0 at a first step, the system

may be getting an eMergetic surplus (AES > 0) through a reduction of the

consumption of natural resources achieved by a better use of resources or

technological progress. In the same way, if RS < 0, we have seen that

development is not sustainable from an economic standpoint but it may become

sustainable through an improvement in the energy yield of the production

system permitted by technological progress (PT3 > PTmin3).

l Measurements based on the social value of environmental goods and

services, derived from the “total economic value” suggested by the London

school, could provide information on the level of satisfaction due to the aesthetic

or recreational nature of the environment. We have demonstrated that this type

of information cannot be provided by energy-based evaluation methods

(Faucheux & Pillet, 1994). It would appear that environmental standards

concerning these aspects must be closely linked to human preferences and

cannot, therefore, be determined by physical evaluation methods but rather by

evaluation procedures based on individual or collective preferences. As such,

it is possible that evaluations of environmental goods and services carried out

on this sort of basis will lead to restrictions with regard to environmental

exploitation even if previously determined indicators of “survivability” provide

satisfactory results. From this point of view, it would appear essential that the

actual price of environmental goods and services (Ve) should coincide with their

social value (Vs), determined by methods that reveal preferences. This condition

would then constitute a third sustainability intermediate subgoal from the

economic point of view.

As we can see from the sustainability tree we propose (Figure 2), sustainability

intermediate subgoals determined with the help of energy-based evaluation

techniques obey an ecological rationality and are complementary with

intermediate subgoals that obey an economic rationality. In our opinion, it is

the implementation of an analysis based on a procedural rationality that allows

such an articulation. The “sustainability tree” (which still requires a great deal

of further study) shares the ecological/economic approach which we have situated in the “north-east” quadrant of Figure 1.


CONCLUSION

We may thus conclude that because it is impossible for a substantive economic rationality to integrate the environmental dimension of sustainable development, and because of the extremism of a strict ecological rationality in the apprehension of the human dimension of sustainability, we should plead in favor, not of an enlarged substantive economic rationality, but of a procedural rationality. We believe we have demonstrated that in order to analyze the conditions for sustainable development, standard approaches to the economy and the environment, conventional ecology, and the analysis of the London school must cease to diverge. These various methods and their underlying rationalities would be better served if they were regarded as being complementary.

In our view, new methodologies based on a procedural rationality4* are the way to do this. According to this perspective, the point is no longer to choose the optimal solution but to identify a satisfactory solution from the various possible options deriving from different criteria of sustainability.

In some situations, it may be possible to define a linear sequence, where at each stage the concern would be to identify a “satisfactory” course of action, prior to considering the next policy subgoal in the sequence. Sequential processes of decisions may be appropriate, dealing in a structured way with different dimensions of a decision-making situation, For example, there may be possibilities of technological progress, and of changes in production methods and consumption patterns, that would relieve pressures on natural resources and the environment, so that a country had new possibilities to reach a sustainable trajectory even if initially the indicators had given “unsatisfactory” results. This is likely to be a workable approach where the goals are relatively coupled and are not strongly antagonistic to each other. (For a detailed discussion about such a sequential and iterative decision-making process which suggests possible trajectories for implementing a sustainable development, see Faucheux & Froger, 1995).

Another potential way, not developed here, is to adopt a simulation modeling framework where the decision-maker can test different model trajectories exploring sustainable development policies and their effects under alternative assumptions about resource availability, population growth, technological change possibilities, and environmental sensitivity to pollution or other stresses. The ECCO modeling methodology is one example of such a technique, where the model user can explore scenarios in interactive and iterative ways (Slesser et al., 1994; M&al, Schembri, & Zyla, 1994).

More typically, however, difficulties with simultaneous achievement of all subgoals-economic, ecological, and social-may be identified. Multicriteria decision aid methodology by definition makes no a priori assumptions about the possibility (or not) of tradeoffs between different dimensions or subgoal


achievements (Munda et al., 1994). In this respect, such a methodology aims to provide insight into the nature of the conflicts and the choices that implicitly or explicitly will have to be resolved through time. This can help the process of negotiated compromise situations, thus increasing the transparency of the decision process. The requirement is for discussion and decision-making processes that allow information of a wide variety of types to be brought together in an orderly and structured way (Faucheux, Froger, & Munda, 1995). All these methodologies are consistent with procedural rationality and with what it is now customary to call an “ecological economic” conception of sustainable development.

APPENDIX 1

The first models with resources, those of Dasgupta and Heal (1979), Stiglitz (1974, 1979), and Solow (1974, 1986), use a utility function U = U(C) leaving out any resource variable. However, they use a Cobb-Douglas-type production function with totally substitutable factors. Thus, Stiglitz uses a Cobb-Douglas Q=K”tie@witha+b= 1 where R represents the natural resource, Kis capital, g is the rate of technological progress assumed to be constant or zero, and Q is aggregate output.

Siebert (198 1) suggests models with natural resources (renewable resources, as it happens) in the following form:

The equation consists of maximizing social welfare W

W = .(-U(G, R)e-“dt

under the constraints:

R’ = G(R) - Xt xt = x + cr et = c + cr K’=F(K,X)-C

where R represents the stock of a renewable resource, R’ the net increase in this resource, G(R) its natural increase, and Xt the extraction flow in t of the resource. The extraction flow itself is the sum of the extraction as a factor of production X, and the extraction as final consumption C,. Total consumption Ct includes consumption of the resource C, and consumption C in the traditional sense of the term. Investment or net capital increase K’ is equal to output F(K, X) minus consumption C. Optimality conditions are reduced to equaliza- tion of the resource growth rate and the interest rate r.4g

What Forms of ~ationai~t~ for Susta;~ab/e Deve/o~me~t? 197

Siebert (1987) also suggests models with pollution, in the following form:

Max W= ~~~(C, P)e-“dt

under the constraints:

P’=flK, P)-bK-aaP K’ = flK, P) - C - I,

in which P’ represents the change in pollution, K and K respectively represent investment and the stock of productive capital, P is the level of pollution, C is consumption, I, and K, respectively are investment and capital in the depollution sector.

APPENDIX 2

Barbier and Markandya (1990) suggest the following model:

The rate of degradation of the environment dS/dt = S can be expressed by the equation:

where @‘is the flow of waste, A the flow of waste assimilation by the environment, R the flow of renewable resources, G the flow of biological production, and E the flow of exhaustible resources. The functionf is assumed to be ascending, convex and differentiable, with S = 0 for W = A and R -I- E = G.

Of these five variables, K R, and E are linked to economic activity, represented here by consumption C, while A and G are linked to natural activity, represented here by X, the stock of environments assets.

This gives W = cV( C), where FV( C) > 0 and FV’( C) > 0 R = R(C), where R’(C) > 0 and R”(C) > 0 E= I$C), where E(C) > 0 and E’(C) > 0 A = A(X), where A’(C) > 0 and A”(C) < 0 G = G(X), where G’(C) > 0 and G”(c) < 0.

The existence is assumed, as we have said earlier, of a minimum value X of environmental assets, a threshold value beneath which irreversible effects take place with regard to both the depletion of renewable resources and the emission of waste.

We can thus state that the rate of degradation of the environment:

S=h(CX),forX=&,andS>>OforX<X. -


As degradation of the environment affects the stock of environmental assets, reducing it, we can state:

X=-ah(C,X),forX=XandX<<OforX<&.

In such a model, the durability constraint is represented by the absence of degradation of the environment-that is, S = 0, which supposes that both IV= A and R •t E = G, that is, both that the flow of waste does not exceed the assimilation capacity of the environment and that the sum of flows of renewable and depletable resources does not exceed biological output. Note that with this latter formulation, it is possible to take into account only a global constraint on resources, leaving open the possibility of substituting renewable resources for depletable resources.

If S # 0, X < 0, that is, the quality of the environment is reduced. If X falls below the threshold value & we are faced with ecological catastrophe and the path is clearly not sustainable. This is what the authors refer to as an absolute ecological constraint.

The objective function of the model is a collective utility function where utility depends both on consumption C and the existing stock of environmental assets X which represents the quality of the environment:

u = U(C, X) where U’(C) > 0, U(X) > 0, U“(c) < 0, and U'(x) < 0.

The equation is then:

Max ~~~-~~(~, X)cit, when sous X = --ah (C,X)

Optimal control theory teaches that the optimization of a system dynamic of this type is given by the maximization at all points of the so-called Hamiltonian function of the system-that is, in this case:

H= e+ (U(C,X) - P[-ah (C,X)])

where P is an added variable associated with the equation of the evolution of environmental assets X.

The solution of this equation determines two equilib~um points-that is, two points at which the two variables X and P are stationary (P = 0 and X = 0). The phase diagram (Figure A.2.1) shows that point B is stable and point A unstable. Configuration of the optimal path of the economy leads to the following conclusions:


P

P’l

P*2

A

!! x* 1 x*2

Figure A.2.1

1. If the initial value X0 > X*1, the optimal policy consists in placing the economy on the path leading to stable equilibrium B. At this point, growth is sustainable, since X = 0 and X > x.

2. If the initial value X0 = X*1, the optimum consists in remaining at this value X*1, where growth is sustainable.

3. If the initial value X0 < X*1, the optimum is a path leading to & hence to environmental catastrophe. Optimal growth is not sustainable.

Thus X*1 represents the initial minimum level of environmental assets needed to obtain an optimal path that is also sustainable. If the initial quality of the environment level is low, unsustainable growth is the optimum.

Acknowledgment: This article is based on a paper presented to the 5th Annual International Conference of the Society for the Advancement of Socio-Economics (S.A.S.E.), March 26-28, 1993, New York. The authors thank B. Gazier and B. Paulre for their helpful comments of a preliminary version of this paper. Financial support from the European Science Foundation, from the “Programme Environnement” of the French CNRS, and from the EEC (DG XII) for parts of this research is gratefully acknowledged.

NOTES

1. “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their needs” (WCED, 1987, p. 43).

2. “Because of the uncertainties involved, pollution control policy should be seen as an iterative search process based on a ‘satisficing' rather than an optimizing principle.“(Pearce &Turner, 1990, p. 20).

THE jOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 1 0995

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

In this sense, M. Allais (1953, p. 510) defined rationality as follows: “a man is considered rational when a) he pursues goals that are mutually consistent; and b) he employs appropriate means for achieving these goals.” In Simon’s analysis, the theoretical pair “substantive rationality/procedural rationality” tends to replace that of “global rationality/ bounded rationality.” “Behaviour is substantively rational when it is appropriate to the achievement of given goals within the limits imposed by given conditions and constraints. . . . Classical economic analysis rests on two fundamental assumptions. The first assumption is that the economic actor has a particular goal, for example, utility maximization or profit maximization, The second assumption is that the economic actor is substantively rational” (Simon 1976, pp. 130-131). These models include the intertemporal dimension or, more specifically, the intergeneration~ dimension associated with respect for Pareto’s optimum. As an example, Maler’s model (1992) uses a multigeneration~ structure (Blanchard & Fisher, 1989, pp. 92-100) containing both “‘young” and “old” people in each generation, with the “young” in I becoming the “old” in t-l- 1, the “old” in t disappearing in t-i- 1, and a new “young” group appearing in t+ 1, and so forth, in order to illustrate this intergenerational dimension. The decision to include these environmental variables in the utility or production function actually stems from the hypothesis regarding the role of the resource: in the former case, the resource is the object of a final consumption and supplies flows of utility (amenities) directly to the agents; in the latter case, the resource is an input contributing to the production of an output and thus constitutes an intermediate consumption. Some resources are obviously both. Technological progress is assumed to increase the productivity of labor and capital in compensation for the depletion of natural resources. A “backstop technology” is one that could produce a resource on an inexhaustible basis at a high but constant cost (Nordhaus, 1973). As described by Pearce (1988a, p. 601), “John Rawls’s theory of justice has been invoked as the moral basis for arguing that the next generation should have access to at least the same resource base as the previous generation. Rawls’s ‘maximin’ strategy suggests that justice is to be equated with a bias in resource allocation to the least advantaged in society. Such a rule would emerge from a constitution devised by people brought together with a ‘veil of ignorance’ about their exact position in society. Risk aversion dictates that the constitution-makers would avoid disadvantaging specific groups for fear that they themselves would be allocated to those groups. The intergenerational variant of the Rawls outcome simply extends the “veil of ignorance” to an intertemporal context in which each generation is ignorant of the time which it will be allocated.” Note that several authors have extended Hotelling’s rule, initially intended only for exhaustible resources, to renewable resources (Maler, 1992). Or, more explicitly, if we accept the latest developments in endogenous growth theory, only tangible capital, human capital, and knowledge are rare. This is perfectly summed up in Nordhaus’s conclusion: “Is growth sustainable? Over the long run, the answer to this question will depend upon the adequacy of our investment in human capital, knowledge, tangible capital and, to a lesser degree, in natural and environmental capital” (Nordhaus, 1992, p. 37). There is nothing in the above to distingu~h growth theory from sustainable growth theory. “I shall use . . . ‘substantive rationality’ to refer to the concept of rationality that grew up within economics. Behaviour is substantively rational when it is appropriate to the achievement of given goals within the limits imposed by given conditions and constraints” (Simon, 1982, p. 425).

What Forms of Rafionalify for Sustainable ~evelopme~f? 201

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24. 25.

26.

Constraints are said to be “in the nature of things” if they consist of defining relationships, of balanced accounts, and of dynamic relationships defining the variation rate of a variable. The optimum resulting from maximizing the objective-function under such constraints will then verify the marginal conditions (TSB and Lagrange multiplier equality) and the optimum will be a first-best optimum. This attitude is actually that not of the ecologists themselves but of philosophers and generalists quoting the latter, or of the ecologically minded who perceive the economy in terms of ecology. The very term “Deep Ecology” (Naess, 1973; Devall & Sessions, 1985) -designates a philosophic~ world view, an “ecosophy” as some would have it, based on the primacy of Nature. It is not by any means a unified or consistent philosophy and, thus, offers great diversity and flexibility in both its origins and current manifestations. An expanded theory of justice attributes rights to Nature and maintains that exploiting nature is as reprehensible as exploiting human beings. The theory of property rights, which forms an integral part of neoclassical economic theory, attributes rights only to the economic agents who can (must) possess the things they exchange, which involves an exchange of exclusive and transferable rights. It is obvious that these models are totally unrelated to the economic modeling based on anthropocentrism. This is why it appears erroneous to combine, as Nordhaus does (1992), Forrester’s basically anthropocentric modeling as used by the Club of Rome, and the fundamentally biocentric “Deep Ecology.” Humans are given no special importance in C&a; rather there are seen as elements in the larger system of the Earth. “Gdia denies the sanctity of human attributes” (Sagan and Margulis, 1984). In this respect, Gala is concerned primarily with the well-being of the living systems of the Earth as a whole and is holistic in this sense” (Wallace & Norton, 1992, pp. 108109). As Lovelock writes (1989): “In the past, it sometimes happened that the conditions of life on the planet changed abruptly, and this could very well happen again. G&a and life will continue, but perhaps without us.” This is Barry Commoner’s “third law of ecology.” According to Drysek (1983): “In general, we must recognize in nature a superior designer and systems maintainer. Even if nature’s path has not always been smooth (just ask the dinosaurs), it is far superior to mankind’s” However, the analogy between economics and ecology must not be driven too far. Most ecological works are empirical and do not use theoretical formalization, unlike economic analysis (Shogren & Nowell, 1992) Unsurprisingly, these diverse notions of equilibrium often lead to interpretations cast in terms of optimality. Potvin (1991) distinguished between two differing notions of optimality in ecology. The first, which is normative, designates as “optimal” the most desirable state of the ecosystem. The second designates the same condition as a point of optimal functioning-that is, “a transitory phase with a multidimension~ framework in which destabilizing forces from without and thermod~~ics from within strike an equilib~um~ (Potvin, 1991, p. 8). For more details, see Deleage (1991). This principle, introduced in 1922 by Lotka, stipulates that competing systems tend to maximize energy flow by time unit and that those systems survive which have the best- developed forms for maximizing beneficial energy flow-that is, systems with the capacity for retroacting so as to admit m~imum energy flow input for boosting efftciency. Note that this expansion is not the work of the ecologists themselves, who are generally fairly conservative in this regard.


21.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37.

As Deltage has pointed out (1991), “According to H.T. Odum, there is no essential difference between natural and social phenomena. In both cases, the same principle of optimization of raw-material and energy consumption is at work” (Del&age, 1991, p. 138). “The use of a single concept and a single unit for measuring everything leads to the reductionist interpretations of living reality that have sometimes marred energy budget calculations based on those of H.T. Odum” (Deleage, 1991, p. 142). “Reductionism has made a flamboyant entrance into ecology and economics, where a tendency to explain everything according to the laws of thermodynamics has grown over the past twenty years, during which time the terms ‘entropy’ and ‘negentropy’ have gained wide currency. Thus, in ecology, everything is supposedly explained by considerations of energy. The calorie became the universal unit of measure that made it possible to express the strategic reasons for the adaptation of different organisms” (Labeyrie, 1984).

Victor (1991, p. 196) emphasizes “that it may seem premature to assert that Pearce and his colleagues have founded a new school, but there is no doubt that their ideas are already influencing the field and government policy-makers, and that this influence seems set to increase in the years to come.” “First, as emphasized by conventional approaches, the environment provides useful material and energy inputs for the economic process; second, the environment assimilates the waste by-product generated by this process; and third, the natural environment provides certain utility-yielding services or ecological functions that are essential for supporting the economic system and human welfare” (Barbier, 1990, p. 10). “Natural capital differs from man-made capital in a crucial respect. Man-made capital is virtually always capable of symmetric variation-it can be increased or decreased at will. Natural capital is subject to irreversibilities in that it can be decreased but not often increased if previous decrements led to extinction” (D. Pearce, cited in J. Pezzey, 1989, p. 20). “Overall, while there is a powerful case in analytical economics for thinking in terms of maintaining optimal rather than existing natural capital stocks as the basic condition for sustainability, there are also sound reasons for conserving at least the existing capital stock. For poor countries dependent upon the natural resource base, optimal stocks will in any event be above the existing stocks. In other cases, there is a rationale in terms of incomplete information about the benefits of conservation (the failure to appreciate and measure multifunctionality), uncertainty and irreversibility for conserving existing stock. Additionally, resource conservation serves non-efficiency objectives, whereas optimality tends to be defined in terms of efficiency only. Finally, even in terms of efficiency, the existence of a valuation function which is linked to the existing endowment of natural resources adds emphasis to the conservation of existing stocks” (Pearce & Turner, 1990, p. 57). Note the similarity with disequilibrium models in which the constraint of outlets perceived by an agent plays a role analogous to the constraints introduced by the London School.

The solutions generated by such models are also second-best optima. Events are not clearly identified ex ante: agents anticipate the unexpected without knowing the real form in which it will appear. Events actually occur ex post and cannot be anticipated: agents do not expect the unexpected. Simon (1972, p. 561) defines bounded rationality as follows: “we may designate bounded rationality theory as that which incorporates constraints on the ability of the actor to process information.” “Constant physical stocks pose formidable problems of finding homogeneous units for measurement”(Pearce, 1988b, p. 605). “We have no way of adding up the different physical quantities” (Pearce & Turner, 1990, p. 53).

38.

39.

40.

41.

42.

43.

44.

45.

46.

“The problems posed by the search for a satisfying measurement of total capital lie at the heart of our subject. The post-Keynesians deal only with manufactured capital, but their arguments are just as valid for natural capital. The London School, which has placed such emphasis on the conservation of the stock of natural capital, has not dealt with these questions. In addition, the difficulties presented by perfecting valid and lasting measurements for the stock of natural capital could still be greater than those recognized by the post-Keynesians relative to manufactured capital” (Victor, 1991, p. 209). In this, we are in agreement with one of the leading lights of “ecological economics,” who wrote: “To achieve global sustainability we need to stop thinking of ecological and economic goals as being in conflict.... To achieve sust~nability we must develop an ecological economics that goes well beyond the conventional discipline of ecology and in a truly integrative synthesis”(Costanza, 1991, p. 83). The precautionary principle was the main recommendation on sustainable development at the Science and Policy conference, Bergen, May 1990. “One procedure already mentioned is to look for satisfactory choices instead of optimal ones. Another is to replace abstract global goa.ls with tangible subgoals, whose achievement can be observed and measured. A third is to divide up the decision-making take among many specialists, coordinating their work by means of a structure of communications and authority relations” (Simon, 1979, p. 501). “There is no actual substitution of procedural rationality for substantive rationality: rather the latter is subsumed into the former, as the effect of uncertainty meant that rationality needed to back up from the final decision (downstream) to the decision to prepare and construct the final decision (upstre~). The question regarding the rationahty issue is now: ‘was the discussion appropriate?‘rather than ‘is the decision appropriate?“(Favereau, 1989b, p. 149). “Power would then belong to ‘those in the know’, scientists alone being capable of deciding on standards to meet and adjustments to make. They would be outside democratic control, insofar as the debate would be of an essentially technical nature; would involve extremely long periods of time exceeding the scope of individu~ sensibilities; and, because of global interdependencies, would require national sacrifices that it would be difficult to get populations to agree to. The picture is of a type of almost cybernetic, centralized, self- regulating scientific government in which passive individuals would be subject to a number of constraints for which there is no precedent in history. This extreme, though not improbable, scenario, reminiscent of the society described in Orwell’s 1984, should be taken seriously if we are to ensure that it cannot become reality” (Passet, 1979, p. 23 1). “In order to implement and strengthen measures enabling sustainable development to be achieved, it will probably be necessary to make radical changes to national and international institutions. New roles need to be devised for international institutions (World Bank, IMF, GATT, UN) and national states. Clearly, discussions of institutional change will again provoke clashes between supporters of State intervention and fervent believers in free markets” (Baranzini L Biirgenmeier, 1992, p. 50). This is clearly an application of the general principle that states that greater importance is laid on “logically anterior” values than on others. This seems to be the basis for the importance given to primary goods by Rawls (1971), all justice imposing the prerequisite of the satisfaction by such goods of man’s vital needs. We may note that, in this case, the available eMergy surplus valuation procedure can provide the environmental standard not to be exceeded with regard to consumption of natural resources. The available eMergy surplus technique enables the me~u~ment in consistent physical terms of the first two ecological constraints of the Barbier and Markandya model (1990) regarded as representative of ecological sustainability: consumption of renewable

204 THE JOURNAL OF SOCIO-ECONOMICS Vol. 24/No. 1 0995

resources should not exceed their renewal rate; exha~tible resources should be extracted at a rate that allows their replacement by renewable resources.

47. It should be noted that the entropy valuation procedure enables a valuation in physical terms of the third environmental constraint in the Barbier and Markandya model (1990): waste emissions should be less than the assimilation capacity of the environment.

48. Again, we are in agreement with Costanza: “Institutions with the flexibility necessary to deal with ecolo~c~ly sustainable development are lacking.. . . Many of these problems are a result of the inflexible bureaucratic structure of many modem institutions. Experience (e.g., Japanese industry) has shown that less bureaucratic, more flexible, more peer-to-peer institutional structures can be much more efficient and effective. We need to de- bureaucratize institutions so that they can effectively respond to the coming challenges of achieving sustainability” (Costanza, 1991). We may also emphasize the complementarity of the s~i~cono~c approach with that of ecological economics on this point.

49. This result is also found in other more elaborate and more recent models, such as Maler’s model (1992), where the stationary solution is r* = IL, p being the growth rate of the renewable resource.

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