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Notes on Implementing Sustainable Development

Authors: Radner, Roy
Issue Date: Aug-1999
Publisher: Stern School of Business, New York University
Series/Report no.: IS-99-02
Abstract: "Sustainable Development" refers to a set of issues relating to two general questions: (1) Are the presently prevailing technologies and lifestyles of economic development so destructive of the earth's natural resources and environment that the current pace of development cannot be maintained? (2) If so, what combinations of technology, life-style, and rate of growth are sustainable in the 'long-run,' and what mechanisms of cooperation and incentives can be devised to implement them? After providing some introductory background material for newcomers to the subject, and concluding that the answer to the first question is "yes." I sketch some challenges to economic theory implied by the second question. In particular, I argue that, for transnational issues like global warming, the 'standard' approaches of mechanism design theory are inadequate in the absence of a world government or equivalent institution for enforcing cooperative agreements. On the other hand, the typical large multiplicity of noncooperative equilibria of such global dynamic "games" creates a role for analysts to discover (invent?) equilibria that are superior to the status-quo equilibrium, if indeed the current situation can reasonably be interpreted as a (dynamic) equilibrium. I explore this idea in the context of an oversimplified model of the "Global Warming Game."
Appears in Collections:IOMS: Information Systems Working Papers

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