Policy Analysis: Can We Make Growth Sustainable?

Computable general equilibrium (CGE) models promise quantification of the effects of environmental policy on economic behaviour and on reaching a new general equilibrium. Introducing environmental costs or constraints into inputoutput analysis permits calculating a greened (more sustainable) GDP, which could be attained by environmentally sound production processes. Maximizing GDP under environmental and other constraints in linear programming models is more ambitious and also less realistic. Even more removed from reality is finding the time path for moving from one state of equilibrium to another and selecting the optimal state of equilibrium in dynamic and optimal growth analysis. However, abstract models enrich the discussion of new concepts and paradigms — notably of sustainability – and help define them with greater precision.