G-COE GLOPE II Working Paper Series

I offer an approach linking a welfare criterion to the opportunities for sustainable development in an imperfect economy. The approach implies a dependence of the criterion on the economy’s current state. The economy-linked criterion is constructed using an example with the maximin principle applied to a hybrid level-growth measure. This measure includes as special cases the conventional measures of consumption level and percent change as a measure of growth. The hybrid measure or geometrically weighted percent can be used for measuring sustainable growth as an alternative to percent. The problem is considered for the Dasgupta-Heal-Solow-Stiglitz model. Closed form solutions are obtained for the optimal paths including the paths dynamically consistent with the updates in reserve estimates.