A simulation study to propose a methodology to indicate 'sustainable development' for the future: Measuring genuine saving and wealth

This paper proposes a methodology to estimate sustainability indicators for the future and to judge whether world and regional scenarios satisfy the necessary conditions of sustainable development. The indicators examined in this study are the genuine savings (Sg) of the flow base, and changes in wealth per capita (w) of the stock base, both of which are among the World Development Indicators (WDI) proposed by the World Bank. David W. Pearce, Giles Atkinson, and Kirk Hamilton have claimed that it is a necessary condition for both of these indicators to be positive. The formal model in this study is based on the model of optimal growth theory proposed by Hamilton. Data required to estimate the two indicators are obtained from endogenous simulation output data by extending an existing integrated assessment model. We can estimate the indicators for the future until 2100 and for 10 regional divisions of the world. The estimations are preliminary and are not sufficient for detailed or conclusive discussions; however, results suggest that the necessary condition identified above is satisfied for the total world and for developed countries throughout the 21st century, but is not satisfied until the latter half of this century in the developing counties. We have established that i) indicators of future sustainability can be estimated based on the optimal growth theory; ii) the indicators can be obtained using consistent data obtained endogenously from the model; and iii) a conjoint analysis can be applied to make a single index (i.e., monetary term) from different factors of resources and environment. We successfully conducted the present methodology to indicate sustainable development indices and their results based on the Weak Sustainability; however, we have to continue our study to obtain policy implication toward future sustainability.