Weak and Strong Sustainability Indicators, and Regional Environmental Resources
2 Substitutability and Sustainability
On the basis of several attempts to operationalize the framework as well as the indicators for a
sustainable development (see e. g. WCED, 1987; Daly, 1992; Weterings and Opschoor, 1992;
Schmidt-Bleek, 1994; Wuppertal-Institut für Umwelt, Klima und Enerige, 1995; Kosz, 1994)
the environmental and ecological economics branch is working on models to define the signifi-
cance and the crucial elements of an economic development which meets sustainability criteria.
Starting point of this discussion is the notation of the „Total Economic Value“ (TEV) which
primarily sets the scene. The TEV should in principle comprise all relevant economic values of
a natural resource. The size of the TEV depends not only on the decision which values (or
preferences) are to be counted as such, but also on the choice of the relevant discount rate. The
economic value of an asset (e. g. a machine, a stock of natural assets) is conventionally calcu-
lated by all goods and service which can be produced (or maintained) by the asset now and the
future. While with man-made capital, this way of calculating the economic value may be an
appropriate way of dealing with economic trade-offs and internal interest rates of investments,
informational problems with natural assets can hardly be overcome. The choice of discount
rate is a scientific and empirical problem known for long: Should a rate of time preference
which might be very small due to ethical considerations regarding future generations be ap-
plied, when an individual discount rate given consumer goods or interest rates of alternative
investments are probably much higher? However, the TEV is - in theory - divided between
two crucial components (Pearce and Turner, 1990):
TEV = UV + NUV (1)
Equation (1) subdivides the Total Economic Value (TEV) into two elements which are both
difficult to define and to measure. The use value (UV) of a natural resource is defined as the
economic value of the resource derived by goods and services produced or directly consumed.
The use value in this sense can be calculated by empirically testing the importance of the natu-
ral resource in the production function of firms as well as in the utility function of private
households. A production function of a firm thus can be enlarged by an argument explaining
natural resources inputs (e. g. Q = f(L, C, R), where the output of the firm depends not only
on the input of the „classical“ factors of production (labor, capital); additionally natural re-