1. Towards the New Understanding of Sustainable Development Igor Makarov imakarov@hse.ru Higher School of Economics Moscow, Russia Oxford, November 18-19, 2011

2. Sustainable development – classical definition Sustainable development is that one which “implies meeting the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland report) Strong sustainability Weak sustainability

3. Conventional economic development model

4. Strong sustainability

5. ‘Weakness’ of strong sustainability  Any consumption of non-renewable resources even if it is necessary for human development conflicts with the strong sustainability concept  Stopping consuming natural resources will lead to the degradation of human civilization – it is both unpractical and immoral

6. Weak sustainability  Sustainable development requires that across generations there should be no decline in the possibility of total capital to generate flows of service  The aim of sustainable development is the increase (at least non-diminution) of total welfare which is comprised of natural, physical and human capital  Any form of capital can be substituted by the others

7. Adjusted net savings (World Bank)

8. ‘Weakness’ of weak sustainability: look at ANS data! Source: WB, 2009

9. “Strong’ sustainability, overriding all other considerations, is morally unacceptable as well as totally impractical; and ‘weak’ sustainability, in which compensation is made for resources consumed, offers nothing beyond traditional economic welfare maximization” W. Beckerman (1994)

10. Critical natural capital  Critical natural capital – the part of natural capital which has vitally important functions and can’t be substituted by any other forms of capital or even other types of natural capital

11.  Conventional sustainable development concept proceeds from the prerequisite that the larger amounts of physical, human and natural capital generation possesses the better it is able to respond to challenges it faces, including natural resource and environmental ones

12. Iceland Switzerland Costa Rica Sweden Norway Mauritius France Austria Cuba Colombia EPI (2010): Top10 countries Source: www.epi.yale.edu

13. Tragedy of the commons  Each herdsman wants to graze more and more cattle on the pasture, but it leads to degradation  Situations of the conflict between individual and common interests – social dilemma Garrett Hardin (1968)

14. Why do institutions matter?  They help to resolve social dilemmas  Ostrom (1990) showed that some communities can manage the commons efficiently and others can’t. It depends on whether the community is able to build robust institutions Elinor Ostrom (1990)

15.  Better institutions result in lower transaction costs which have significant importance while solving social dilemmas.  Institution of trust! Fukuyama (1995): the deficit of trust is like an additional tax imposed on transactions

16. Correlation between EPI and Trust Index

17.  Robust institutions decrease the vulnerability of society to environmental challenges!  Sen (1999): there have never been hunger in democratic societies even if these societies are poor! Vulnerability of society to environmental challenges is not a matter of poverty but a matter of poor institutions Why do institutions matter?

18.  Institutions of civil society are able to unite the whole society in green initiatives. Due to civil society’s efforts “green” becomes up-to- date – more and more people (and than firms and governments) become “greener” Why do institutions matter?

19. Weak sustainability concept + critical natural capital + addition of institutional capital

20. Thanks for your attention!