This paper presents an economic model of sustainability defined as intergenerational fairness. Assuming that intergenerational fairness is an obligation of each generation, a recursive optimization problem is obtained. The problem has the advantage that uncertainty can readily be incorporated in the model and it can be solved numerically for a wide range of specifications. The possibility of trade-offs between efficiency and sustainability are discussed. Under plausible conditions, it is shown that a sustainability obligation is met only if there is the expectation of economic growth.
- Dynamic ProgrammingIntergenerational EquityNumerical MethodsSustainabilityUncertainty