f the environment.
Arrow et al., 2004, in a joint authorship between leading economists and ecologists, present an approach for evaluating alternative criteria for consumption, seen over time in a sustainable development perspective. Inter-temporal consumption and utility are introduced here as measurement points for sustainable development. One of the determinants of consumption and utility is the productive base of society, which consists of capital assets such as manufactured capital, human capital, and natural capital. The productive base also includes the knowledge base of society and institutions.
Although institutions are often understood as part of the capital assets, Arrow et al. (2004) only consider institutions in their capacity as guiding the allocation of resources, including capital assets. Institutions in this context include the legal structure, formal and informal markets, various government agencies, inter-personal networks, and the rules and norms that guide their behaviour. Seen from an SD perspective, the issue is then: how, and to what extent, can policies and institutional frameworks for these influence the productive basis of society and thereby make development patterns more sustainable.
The literature includes other views of capital assets that will consider institutions and sustainable development policies as being part of the social capital element in society’s productive base. Lehtonen (2004) provides an overview of the discussion on social capital and other assets. He concludes that despite capabilities and social capital concepts not yet being at the practical application stage, the concepts can be used as useful metaphors, which can help to structure thoughts across different disciplines. Lehtonen refers to analysis of social-environmental dimensions by the OECD (1998) that addresses aspects such as demography, health, employment, equity, information, training, and a number of governance issues, as an example of a pragmatic approach to including social elements in sustainability studies.
Arrow et al., (2004) summarize the controversy between economists and ecologists by saying that ecologists have deemed current consumption patterns to be excessive or deficient in relation to sustainable development, while economists have focused more on the ability of the economy to maintain living standards. It is concluded here that the sustainability criterion implies that inter-temporal welfare should be optimized in order to ensure that current consumption is not excessive. However, the optimal level of current consumption cannot be determined (i.e. due to various uncertainties). Theoretical considerations therefore focus instead on factors that make current consumption more or less sustainable. These factors include the relationship between market rates of return on investments and social discount rates, and the relationship between market prices of consumption goods (including capital goods) and the social costs of these commodities.
Some basic principles are therefore emerging from the international sustainability literature, which helps to establish commonly held principles of sustainable development. These include, for instance, the welfare of future generations, the maintenance of essential biophysical life support systems, more universal participation in development processes and decision-making, and the achievement of an acceptable standard of human well-being (Swart et al., 2003; Meadowcroft, 1997; WCED, 1987).
In the more specific context of climate change policies, the controversy between different sustainability approaches has shown up in relation to discussions on key vulnerabilities; see Section 2.5.2 for more details.