Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-11-22T07:43:36.334Z Has data issue: false hasContentIssue false
  • English
  • Français

Measuring sustainability under regime shift uncertainty: a resilience pricing approach

Published online by Cambridge University Press:  05 October 2010

KARL-GÖRAN MÄLER  and
CHUAN-ZHONG LI
KARL-GÖRAN MÄLER
Affiliation:
The Beijer Institute, Royal Swedish Academy of Sciences, SE-104 05 Stockholm, Sweden. Email: [email protected]
CHUAN-ZHONG LI
Affiliation:
Department of Economics, Uppsala University, SE-751 05 Uppsala, Sweden; The Beijer Institute, Royal Swedish Academy of Sciences, SE-104 05 Stockholm, Sweden; and Department of Economics, Zhejiang University, Hangzhou 310027, P.R. China. Email: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper is concerned with the theory of resilience pricing and sustainability measurement in the presence of risk for regime shift in a dynamic economy–environment system. Following Holling (Annual Review of Ecology and Systematics, vol. 4, 1973, pp. 1–23), we consider resilience as the maximal perturbation that the system can absorb without flipping into a qualitatively different state. Using a multisector growth model under uncertainty, we derive the shadow price of resilience that affects the probabilities of the system to flip in the future. We also analyze the role of resilience on sustainability with both ex-ante and ex-post welfare measures.

Type
Research Article
Information
Environment and Development Economics , Volume 15 , Issue 6: 15 YEARS OF EDE – ADVANCES AND CHALLENGES IN ENVIRONMENT AND DEVELOPMENT ECONOMICS , December 2010 , pp. 707 - 719
Copyright
Copyright © Cambridge University Press 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aronsson, T., Löfgren, K.-G., and Backlund, K. (2004), Welfare Measurement in Imperfect Markets: A Growth Theoretical Approach, New Horizons in Environmental Economics, Cheltenham: Edward Elgar.CrossRefGoogle Scholar
Arrow, K.J., Dasgupta, P., and Mäler, K.-G. (2003), ‘Evaluating projects and assessing sustainable development in imperfect economies’, Environmental and Resource Economics 26: 647–685.CrossRefGoogle Scholar
Barbier, E. and Strand, I. (1998), ‘Valuing mangrove-fishery linkages’, Environmental and Resource Economics 12: 151–166.Google Scholar
Carpenter, S. R., Ludwig, D., and Brock, W.A. (1999), ‘Management of eutrophication for lakes subject to potentially irreversible change’, Ecological Applications 9: 751–771.CrossRefGoogle Scholar
Cropper, M.L. (1976), ‘Regulating activities with catastrophic effects’, Journal of Environmental Economics and Management 3: 1–15.CrossRefGoogle Scholar
Dasgupta, P. and Mäler, K.-G. (2000), ‘Net national product, wealth, and social well-being’, Environment and Development Economics 5: 69–93.CrossRefGoogle Scholar
Dixit, A.K. and Pindyck, R.S. (1994), Investment Under Uncertainty, Princeton: NJ: Princeton University Press.CrossRefGoogle Scholar
Ekins, P., Simon, S., Deutsch, L., Folke, C., and de Groot, R.S. (2003), ‘A framework for the practical application of the concepts of critical natural capital and strong sustainability’, Ecological Economics 44: 165–185.CrossRefGoogle Scholar
Gunderson, L.H. (2001), ‘Managing surprising ecosystems in southern Florida’, Ecological Economics 37: 371–378.CrossRefGoogle Scholar
Holling, C.S. (1973), ‘Resilience and stability of ecological systems’, Annual Review of Ecology and Systematics 4: 1–23.CrossRefGoogle Scholar
Mäler, K.-G. (2008), ‘Sustainable development and resilience in ecosystems’, Environmental and Resource Economics 1: 17–24.Google Scholar
Mäler, K.-G., Li, C.-Z., and Destouni, G. (2007), Pricing resilience in a dynamic economy-environment system: a capital theoretical approach', The Beijer Institute of Ecological Economics Discussion Paper No. 208, Stockholm, Sweden.Google Scholar
Max, T., Pihl, L., Rönnbäck, R., Wennhage, H., Söderqvist, T., and Kautsky, N. (2004), ‘When resilience is undesirable: regime shifts and ecosystem service generation in Swedish coastal soft bottom habitats’, The Beijer Institute of Ecological Economics Discussion Paper No. 187, Stockholm, Sweden.Google Scholar
Nelson, D., Adger, W.N., and Brown, K. (2007), ‘Adaptation to environmental change: contributions of a resilience framework’, The Annual Review of Environmental Resources 32: 395–419.CrossRefGoogle Scholar
Norton, B. (1995), ‘Resilience and options’, Ecological Economics 15: 133–136.CrossRefGoogle Scholar
Pearce, W.D. and Atkinson, G.D. (1993), ‘Capital theory and the measurement of sustainable development: an indicator of ‘weak’ sustainability’, Ecological Economics 8: 103–108.CrossRefGoogle Scholar
Pearce, W.D., Markandya, A., and Barbier, E.B. (1989), Blueprint for a Green Economy, London: Earthscan Publications.Google Scholar
Perrings, C. (2006), ‘Resilience and sustainable development’, Resource and Development Economics 11: 417–427.Google Scholar
Samuelson, P.A. (1961), The evaluation of ‘social income’: capital formation and wealth', in Lutz, F.A. and Hague, D.C. (eds), The Theory of Capital, London: Macmillan.Google Scholar
Scheffer, M., Carpenter, S.R., Foley, J.A., Folke, C., and Walker, B. (2001), ‘Catastrophic shifts in ecosystems’, Nature 413: 591–596.CrossRefGoogle ScholarPubMed
Tsur, Y. and Zemel, A. (2006), ‘Welfare measurement under threats of environmental catastrophes’, Journal of Environmental Economics and Management 52: 421–429.CrossRefGoogle Scholar
Walker, B., Pearson, L., Harris, M., Mäler, K.-G., Li, C.-Z., and Biggs, R. (2010), ‘Incorporating resilience in the assessment of inclusive wealth: an example from South East Australia’, Environmental and Resource Economics 45: 183–202.CrossRefGoogle Scholar
Weitzman, M.L. (1976), ‘On the welfare significance of national product in a dynamic economy’, Quarterly Journal of Economics 90: 156–162.CrossRefGoogle Scholar
Weitzman, M.L. (2001), ‘A contribution to the theory of welfare accounting’, Scandinavian Journal of Economics 103: 1–24.CrossRefGoogle Scholar