Overview
1. What does sustainability mean?
The term sustainability originally comes from forestry: One should only fell as many trees as will regrow through new plantations, keeping tree population and yield constant. The concepts of weak and strong sustainability provide different answers to the question of what it means to maintain a sustainable stock.
Weak sustainability is applied in environmental economics and is based on the principle of interchangeability: natural capital (natural resources) can be replaced by physical capital (e.g. machines or material infrastructure) and human capital (e.g. knowledge). The three areas of environment, society and economy exist separately and interact through the exchange of resources. Physical capital is included in the economic sphere, human capital in the social sphere and natural capital in the ecological sphere. Sustainability means keeping the total value of the capital stock (the sum of the three types of capital) constant and increasing it where possible. Natural, physical and human capital are comparable and mutually substitutable, i.e. interchangeable, by means of one measure, namely money. In order to carry out this exchange, methods of comparison are needed, for example a cost-benefit analysis.
Markets, in which the three forms of capital are traded, can be created. This leads to commodification, meaning that free goods, like air and water, which are foundational for life, are turned into commodities, which can be traded like any other good. It is therefore not seen as problematic if natural capital is shrinking today as regions turn into deserts, as long as at the same time physical capital is increased, for example by building roads. Due to interchangeability, environmental damage can be compensated financially. Who flys can “offset” the emissions caused with compensation payments, for example into reforestation projects.
The key concept of weak sustainability is optimization – the neoclassical concept of the best possible allocation of scarce resources. In order to allocate resources optimally, externalities have to be considered and calculated. Externalities are caused by actors without them bearing the resulting costs: for example, when a company emits polluted air from a chimney without installing filters or paying compensation to those negatively affected. If externalities are not included in the price, the market optimum does not correspond to the social optimum, which results in market failure due to false price signals. The internalisation of external effects, such as monetary compensation for environmental damage, is therefore the central instrument in the concept of weak sustainability: By means of “right prices”, environmental burdens which have been externalised up to now are internalised, i.e. included in prices. Examples are levies or taxes on polluted water or air as well as emission certificates. Weak sustainability follows the polluter pays principle: Whoever generates ecological and social costs should also bear them. However, what the “right” price for the extinction of a species or degradation of ecosystems should be is not so clear.
Strong sustainability is at the heart of the debates in ecological economics, which go beyond discussing an optimal allocation of resources. Strong sustainability is based on the principle of embeddedness: the economy is a subsystem, embedded in society and the biophysical sphere. Strong sustainability assumes that economic and social life is based on irreplaceable, interwoven ecosystems that must be preserved. Economic activities are confronted with ecological limits. The substitutability of nature with other types of capital is limited. Instead of the idea of optimisation, strong sustainability requires a holistic and systemic view of social-ecological systems and a reasonable deliberation between alternatives. From this point of view, the three areas of environment, social affairs and economy are in many respects incommensurable, meaning not comparable with a measure, and therefore not mutually interchangeable.
In the understanding of strong sustainability, nature is not a stock of resources (capital), but a complex ecosystem that provides mankind with vital functions. Nature has an intrinsic value because there are qualitative differences between produced capital and nature: the former is reproducible (e.g. new bridges can be built), the destruction of nature is often irreversible. “The fish in an aquarium can be made into a fish soup, but fish soup cannot be made into fish for an aquarium”.
Strong sustainability is based on the precautionary principle: possible damage or pollution to the environment that could become dangerous for people must be avoided or reduced, even if it is not 100 percent certain that it will occur. Also the UN Framework Convention on Climate Change builds on the precautionary principle. Therefore, economic action should be based on the findings of climate research.
Sustainability means | Maintaining or increasing the overall value of the capital stock | Maintaining irreplaceable „stocks“ of critical natural resources and ecosystems |
Key idea | Interchangeability of natural capital and other types of capital (machinery, human capital, money) | Embeddedness; Substitutability of nature with other types of capital is limited |
Key concepts | Optimisation (best possible allocation of scarce resources) Internalisation of external effects (polluter pays principle | Incommensurability (not comparable with a measure, e.g. money); Deliberation between alternatives Precautionary principle |
Graphic re presentation |  |  |
Consequences | Monetary compensation for environmental damage (compensation payments) | Human activity can have irreversible consequences |
Economic disciplines | Environmental Economics, Resource Economics | Ecological Economics |
Table 1: Comparison of strong and weak sustainability1
2. Strategies to make economies future fit
What should a transformation towards a climate-friendly, sustainable economy look like? The following strategies differ in their basic assumptions and approaches.
The market-liberal strategy, based on neo-classical ideas as well as those of Friedrich von Hayek, sees the market as the institution that combines individual action and social welfare. This is represented by the image of the ‘invisible hand’, which represents action that unintentionally leads to an optimal social outcome. It regulates supply and demand by means of the market mechanism. Thus, pursuing one’s own interests can serve the common good better than any economic planning. The state is seen as a coercive apparatus whose influence on concrete economic action must be minimised. Free market economy and free trade are the best prerequisites for sustainable economic activity. If there is a functioning market and property system, one can trust that the upcoming transformation will succeed spontaneously with the help of market processes. The task of market-liberal policy is solely to ensure the appropriate legal framework. Within this model, the spectrum ranges from libertarian positions that seek to minimise state intervention (in the tradition of Hayek) to neoclassical positions that opt for correcting market failures (for example, through a carbon (CO2) tax). Market failures can be avoided if ecological goods, such as good air and water quality, are given a price, since scarce resources and production factors are thereby optimally used. The associated expansion of markets is resulting in the commodification of more and more aspects of life that previously had no price.
The strategy of a socio-ecological transformation results from the huge environmental challenges of today. It is inspired by Karl Polanyi, various socio-economic theories, socio-ecological transformation research and partly also Keynes. According to this strategy, a fundamental transformation is needed, which opens new paths towards a sustainable and just economy. Within this strategy, the spectrum ranges from pragmatic to radical ideas of socio-ecological transformation. A pragmatic position is, for example, that of the German Advisory Council on Global Change (WBGU), which proposes a new global social contract for a sustainable global economic order. This approach to ecological modernization combines social and systemic innovations. A strong public sector, good public technology and innovation policy and public infrastructure together create opportunities for ‘transformation by design’. However, economic growth remains important for solving distribution conflicts by distributing an ever larger ‘cake’. Economic, social and ecological sustainability can be achieved by decoupling economic growth from resource consumption and emissions.
Amongst others, the degrowth movement calls for a radical socio-ecological transformation. It stresses two main obstacles to sustainability, that have to be overcome: the growth imperative and the tendency towards commodification of all areas of human life. As absolute decoupling neither has happened until now, nor is a viable strategy for the radical reduction of material use and emissions needed, it calls for turning away from the imperative to grow the economies. Instead of growing material prosperity and consumption, the focus should be on growing human well-being and sufficiency. Therefore, decommodification is needed, as many areas are not suitable to be traded as goods on the market. If fundamental basics of a good life, from fresh air and water, to good education, public health and public transport are provided to everyone, rather than traded on markets, well-being depends less on (growing) income and consumption.
This is a vision of a profound transformation, leading to a truly sustainable and equitable economy. The approaches are political and strongly rely on social movements – such as Fridays for Future – to build up pressure ‘from below’ coming from civil society, in order to initiate systemic changes. It involves resistance to undesirable developments (e.g. lignite mining) as well as new forms of sustainable economic activity such as the Commons movement, social entrepreneurs or cooperatives. The following table compares the principles of the different strategies:
Market-liberal strategy | Pragmatic strategy of a socio-ecological transformation | Radical strategy of a socio-ecological transformation | |
Inspired by | Hayek, neoclassical economics | Polanyi, Keynes, socioeconomics, environmental economics, ecological economics | Polanyi, socioeconomics, ecological economics |
Goal | Securing market organisation, competitiveness, growth | Decoupling economic growth from increasing consumption of resources | Moving away from growth imperative, socio-ecological alternatives |
Commodification | Yes | Partly | No |
Transformation | Spontaneous transformation | Transformation by design | Social innovation aiming at systemic change |
Table 2: Strategies for sustainable economies²
