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The economic problem · 10 of 14

Sustainability and ethical choices in economics

Compare the evidence that growth runs down the environment with the evidence that it need not

Key terms
Sustainable development
Sustainable development is meeting the needs of the present without compromising the ability of future generations to meet their own needs.
Economic growth
Economic growth is a rise in real GDP, the output of goods and services an economy produces, adjusted for inflation.

More environmental protection can cost output, and waste costs both

A production possibility frontier can show the trade-off between economic output and environmental protection. At P a country chooses high output and little protection; at T, high protection and little output. Along the frontier, more protection has an opportunity cost in lost output.

A point such as M, inside the frontier, is productively inefficient. From M a country could have more output with the same protection, at Q, or more protection with the same output, at S. Market-based tools such as pollution taxes and tradable permits can deliver the same protection at lower cost than rigid rules.

Output against environmental protectionVertical axis: Economic output. Horizontal axis: Environmental protection. PPF: a downward-sloping curve.PPFPTMQS
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The frontierAt P a country has high output and little protection; at T, high protection and little output.

Moving along the frontier trades output for protection; moving from M to Q or S costs nothing.