Growth and environment

Since the end of the 1960s there has been an ongoing discussion whether continued economic growth is compatible with finite supply of nonrenewable resources and with the sensitivity of renewable resources to the human interferences in natural ecological systems. On the one hand, environmentalists (and others such as the Club of Rome) have argued that the finiteness of the resource base must put an end, not only to continued growth but to the present lifestyles in the industrialised world. On the other hand, economists (but not all) have argued first that there are sufficient substitution possibilities between man-made capital and natural capital to make further growth possible and second that in addition to this, technical progress will reduce the dependence on natural resources. To this the environmentalists respond that the substitution possibilities are limited and technical progress cannot change the fundamental laws of thermodynamics. These are some of the issues to be discussed in this paper.

Irrespective of the prospects of future technological development or the substitution possibilities, we want to manage the use of environmental resources as well as possible. It is more important to discuss what is growing than whether we should have growth or not. Usually, growth is discussed in terms of GNP (or GNP per capita). But this we know is not an appropriate measure of welfare. How could we define a better index of growth?