Investing in Sustainable Development

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Figure 3: Dimensions of Sustainability as Capital Stocks. On e example ..... Whereas for solar energy not the total amount is at human disposal, but only the use.
Investing in Sustainable Development The Reproduction of Man Made, Human, Natural and Social Capital (published in: Int. J. Sustainable Development, Vol. 4 (2001), No. 2, pp. 184-201 )

Joachim H. Spangenberg Sustainable Europe Research Institute, Cologne Office, Grosse Telegraphenstr. 1, D-50676 Köln, Germany, e-mail:[email protected]

Abstract: Sustainability as described in Agenda 21 is characterised by a complex system of interacting targets in four dimensions: social, environmental, economic and institutional. This four dimensional approach is illustrated with a new communicative tool based on a spherical structure, the ‘prism of sustainability’. In the economic debate, these dimensions of sustainability are well known; they are referred to as production factors, or as four types of capital (man-made, natural, human and social capital) that have to be serviced with reinvestments from the surplus generated. From a system dynamics point of view, they can be considered independent but coupled non-linear self-organising systems. Sustainability refers to the conditions for maintaining their self-organisation processes, and investment to the measures that can be taken to strengthen the resilience and viability of the systems. Consequently, the ‘currency’ of investment cannot be money in all cases, but has to correspond to the system characteristics. In this context, the question of weak or strong sustainability based on substitution possibilities turns out to be more of a methodological artefact of economics, resulting from single factor analysis instead of a multi-criteria approach necessary for sustainable development. This paper focuses on the environmental and the institutional dimension, i.e. on the natural and social capital. For the environmental dimension, the reduction of material flows and the need for safeguarding biodiversity are key targets, for the institutional dimension, it is time management, harmonising social rhythms and the creation of ‘chronotopes’.

Key words: Prism of Sustainability, natural capital, social capital, substitution, sustainability indicators, systems theory

Investing in Sustainable Development The Reproduction of Man Made, Human, Natural and Social Capital Introduction

Sustainable Development as elaborated in Agenda 21 (UN 1993) has three explicit dimensions, the social, the economic and the environmental one, and implicitly a fourth, the institutional one (see figure 1). The latter was first made explicit in the system of sustainability indicators adopted by the CSD for the assessment of progress towards sustainability (UNCSD 1996). As in political science, ‘institutuons’ refers to interpersonal systems of rules governing decision making, i.e. not only organisations, but as well institutional mechanisms and orientations. The social dimension refers to intra-individual human characteristics such as skills, dedication, experiences and social attitudes, and the environmental dimension is defined to comprise all bio-geological processes and the elements involved in them. Societal institutions and the value systems behind them are a necessary precondition for economic activities and shape them: e.g. without respect (a value) for private ownership (an institution) no market economy could exist. Nonetheless the economic dimension is singled out as one subsystem of society with a specific logic and dynamic of its own, although this should not be understood as denoting the permanent interactions of the economic, the societal and the environmental systems. Few human activities, individually or collectively, do not involve all four dimensions; at least the social and the institutional one are always present. Every use of natural resources refers to the environmental dimension, and each exchange of goods and services is economic (although not necessarily based on market rules). As the four dimensions are omnipresent in human life, sustainable development can be understood as a group of specific constellations in all four dimensions, characterised by the fact that their synergetic interaction produces a variety of feasible pathways towards a stable development of the overall system. While industrial societies can be characterised as ‘productive societies’, sustainability calls for ‘reproductive societies’. In a more systems science oriented approach, sustainable development can be considered as an optimisation process for a complex system consisting of four independent but coupled subsystems. Each of these has its own geographical scope, logic, rhythms, time scales and dynamics, is regulated by different mechanisms and responsive to different influences. It is this dynamic of the systems, their viability and resilience that is the precondition for the recovery after external disturbances e.g. by conflicts or human exploitation, and that has to be sustained in the long run. On the other hand, due to the non-linear character of environmental, economic, social (institutional) and human (psychological) dynamics any predictions e.g. regarding the results of specific policy measures are only of limited reliability, in particular in the longer term - and that is what sustainability is all about (Spangenberg 1998). The resulting limitations to external steering capabilities are one reason to consider sustainable

development an iterative process in need of a broadly based participative governance in order to keep it on track. The individual dimensions, their mutual interconnectedness and the importance of the interlinkages as fields of developing integrative and - if possible - synergistic policies is visualised by the ‘prism of sustainability’ (figure 1). Figure 1: Dimensions of Sustainability

The direction towards sustainability, however, is not easily identified. Being the result of an optimisation process for four independent but interacting targets, it necessarily does not have a single, clear-cut solution, but includes a range of options to choose from. The choice taken will be dependent on the relative weight attributed to each of the four dimensions and their respective targets, i.e. it will need a balancing of different criteria based on individual preferences. Whereas multi-criteria decision processes (Saaty 1980, Munda 1994, 1995) often end up with a hierarchy of options (here called ‘vertical multi-criteria analysis’), this is not possible in a situation where a ranking of options may be possible for each of the four dimensions, but with varying relative weight of each dimension no ‘best solution’ can be defined regarding sustainable development. This suggests a discourse based policy model to provide a democratic legitimation for the choices to be made, based on what can be called a ‘horizontal multi-criteria analysis’. Thus sustainability politics cannot be based on old fashioned corporatist decision making but needs institutional innovations, i.e. new, more inclusive concepts of governance.

This understanding of sustainability as safeguarding the viability of the subsystems as well as their interconnectedness rules out any definition of a specific state of the system to be defended: it is not a state but the dynamics which needs to be protected (Daly 1996, p.80). The characteristics of this dynamics change with the co-evolution of the natural, social and the economic system, making sustainability a moving target. However, criteria and benchmarks can be defined that permit to detect developments that are definitely unsustainable.

Integration and the Importance of Interlinkages

Sustainability can only be achieved by the mutual integration of the four dimensions, an extremely ambitious although necessary and urgent policy task. The European Union, for instance, is facing the challenge; in its new ‘constitution’, the Amsterdam Treaty the integration of environmental and social concerns all across the policy agenda its explicitly set as an overarching goal. It comprises much more than only the integration of environmental issues in other policy fields, although this is a policy priority, and for good reasons. Not only is the integration deficit in politics as obvious as in science and in economics (to some degree this may be due to the growing albeit changing role of expert systems in complex societies, see e.g. Giddens 1996), environmental politics is still a ‘recent’ policy field and in most countries still lags behind economic, social and foreign politics regarding reputation, resources and influence. Furthermore, due to the time scales of bio-geochemical processes, many damages like extinct species, eroded soils, exhausted deep ground water aquifers or changed patterns of marine water circulation are virtually irreversible in human and societal time horizons or at least need a number of generations to be overcome, like the ozone layer depletion. Obviously, time patterns and rhythms differ between the four subsystems, and natural cycles may be the slowest processes to take into account for sustainable development. However, this is not to denote the seriousness of social depriviation. Most often ignored, negative effects e.g. from mass unemployment or poverty can have massive impacts on self esteem and behaviour (Arend 1981), even of following generations. Similarly, institutional disturbances like the erosion of democratic culture under dictatorships can last for decades if not for generations, as the continuous problems of newly democratising countries illustrate. Integration furthermore means the inclusion of social and institutional concerns in environmental policies (economic concerns have long been there, more often than not in a dominating role). It refers as well to the integration of institutional and environmental concerns in social policies, and – last but not least - the integration of social, environmental and institutional concerns in economics and economic policies. The task of integrated sustainability policies, i.e. the management of a set of interlinked complex non-linear systems, according to an integrated, multi-purpose set of targets is a ‘mission impossible’ for top-down management approaches. As direct steering is not capable of handling this level of complexity (and indeed tends to undermine the selfregulating capacities and thus the dynamics that it is to protect), such politics must be complemented and partly replaced by indirect management. This shifts the focus towards setting the right framework conditions to activate the inherent dynamics and self-organisation capabilities and give them a direction towards sustainability. The resulting kind of steering is expected to be more dynamic and effective, but less precise

than direct policy interventions – which is acceptable, since sustainable development as such is more of a corridor than one specific pathway. Activating the inherent dynamics is an approach that has successfully been applied to the economic subsystem by deregulation policies. However, not taking into account the other dimensions of sustainability and thus the socio-environmental system nurturing the economy might easily lead to unintended side effects. These threaten to overcompensate the gains achieved in first instance, demonstrating the need to take into account the ‘reflexivity of modernity’ (Beck, Giddens, Lash 1996). “Under this extended perspective, meeting the four challenges [of sustainable development] means safeguarding ‘prosperity for all’ while at the same time protecting the ‘sphere of life’ from excessive impositions made by and on behalf of the market process” (Pfaller 2000). Decision making for sustainability thus does not mean to promote a laissez-fair approach, but to optimise the framework conditions, eventually even to re-regulate in order to set framework conditions that prevent the disturbance of one subsystem by another. Figure 2: Dimensions of Sustaiunability as Production Factors

To further complicate matters, not all these processes are happening at the same level and not all of them can be classified as either micro- or macro-processes. Values and institutional orientations (generally shared attitudes) are part of the meta-level of societies and economies, whereas human interaction in communities, in industrial

clusters and in knowledge/innovation networks constitutes the meso-level of society. Messner (1995) calls this ‘the network society’. These elements of the social fabric are not taken into account by traditional economic politics, which focus on the micro-level (assessing the behaviour of ideal consumers and companies under some unrealistic assumptions) and on the macro level of national politics. However, these elements are of crucial importance for the functioning of the economy and its international competitiveness as empirical and theoretical analysis have shown (theory of systemic competitiveness, (Messner 1996, Hinterberger 1998). Figure 2 illustrates the role of institutions as a production factor, on equal footing with capital, labour and the environment.

Capital Stocks, Substitution and the Wealth of Nations

In more traditional economic terms, the four dimensions have been named the man made, human, natural and social capital of a society, as shown in figure 3. In order to assess the development of the overall wealth of nations, some studies tried to measure the development of all four categories of assets/capitals, usually in financial terms (Serageldin et al. 1996,1997). According to the economic theory, non-declining capital stocks are needed in order to provide a long term reliable (Hicksian) income, with investment the means to compensate for the depreciation of the capital stocks. Applied to sustainability this results in the sustainability criterion of non-declining stocks of capitals (Pearce et al. 1990). A controversy shaping much of the economic debate has arisen about the question whether each capital stock has to be maintained independently (Daly 1991), or whether the sum of all four capital stocks has to be nondeclining (Pearce, Turner 1991). The dispute thus focuses on the question to which degree the different forms of capital can be substituted against each other, and to which degree they are complimentary. These problems are specific to economic thinking; they play no significant role in ecology, sociology and political sciences (there is simply no substitute for water, communication or decision making)(Ehrlich et al. 1999). Thus they seem to be more characteristic for the challenge that sustainability poses to economics than the economic challenges of sustainable development. The multi-criteria dynamic understanding of capital stocks and their interactions sheds new light on this controversy. Substitution between different capital stocks as discussed by economists mainly refers to the function of these capitals as production factors. If under the modified factor constellations the product is equivalent (often in monetary terms), substitution is considered possible. However, this analysis refers only to one criterion, value production and consumption, and completely neglects the unavoidable interaction of all four capital stocks and the trade offs that occur to other functions of the respective capital stocks, misguided by the narrow economic definition of the term ‘capital stock’. This value production perspective, however, is a reductionist one and needs to be replaced by a horizontal multi-criteria approach referring to all four dimensions and their characteristics in order to permit an assessment of substitutability in a true sustainability perspective. So instead simple substitution decisions following a single criterion, a systematic or intuitive multi-criteria assessment of the trade offs needs to be (and in real life is) performed. On this basis a decision can be taken, based on prevailing norms and

values. E.g. for decisions about eco-innovations, Rennings (2000) stresses the need for an integrated co-evolutionary assessment that • “includes all sub-systems, i.e. co-evolving social, ecological and institutional systems avoiding any ranking of their importance, and” • “underscores the importance of their interactions.” Figure 3: Dimensions of Sustainability as Capital Stocks

On e example shall illustrate the involvement of all four capital stocks: if a new machine (man-made) replaces skilled workers, this may be an effective substitution regarding production and value creation, but in terms of resource consumption (environmental), income generation (social) and skills training (human), the outcome is definitively different, unless all impacts were reduced to a measurement in monetary terms. The weakness of such an approach, using the economic logic and numeraire outside the economic subsystem, are however obvious (e.g. in Mähler 1996) and have been broadly discussed (Ecological Economics 1998). From a horizontal multi-criteria perspective it should be mentioned that indeed market value is one criterion that can be applied (with all the methodological difficulties known) to all four capital stocks, and that may permit useful answers for specific questions. But, if monetarisation is the answer, what was the question ? Monetarisation provides no information concerning social cohesion, human satisfaction or the integrity of ecosystems. These factors, at least as crucial to sustainable development as monetary value have to be monitored according to their own criteria and must be measured by their specific numeraires. From a

scientific point of view, there cannot be such thing as one comprehensive measure or index of sustainability. Due to the incommensurability of all four capital stocks real substitution is hardly imaginable. This is all the more true when the focus is on the dynamics, not in the inventory of elements of different capital stocks. Thus much of the substitution debate results from a logical misperception, based on a rather static instead of a dynamic understanding of the systems (Coleman 1990). From this extended perspective the question of substitution between two of the capital stocks simply makes no sense. Instead, the appropriate question would be whether in a balance the impacts of a certain action on all four capital stocks are considered positive, negative or neutral (still this assessment will vary between individuals and over time). However, although problematic in various respects (Hinterberger, Luks, Schmidt-Bleek 1998), the capital stock approach still provides a number of relevant insights. This is clearly indicated by the calculations of total wealth performed by Serageldin (1997): If development processes are increasing the man-made capital stock by depleting human, natural and/or social capital, economic development can happen to be de facto decreasing the wealth of nations, even in the sense of the weakest theories of sustainable development permitting unlimited substitution of capitals. Unfortunately, this negative development can go undetected for a long time, as long the indicators used for measuring wealth (GDP, trade balances, etc.) only take the man-made capital into account and ignore the other contributions to wealth, growth and social cohesion. Consequently, economists end up measuring wealth with “a measure of how fast resources are squandered and converted into money flows - irrespective of their effect on society” (Bossel 1996). This misperception is clearly illustrated by figure 4, which confronts the ranking of nations according to GDP, UNDP's Human Development Index HDI and its income-disparity and gender- adjusted versions (in 1995 called GDI and GEM respectively). Serageldin's results clearly indicate that in the majority of cases the human and the natural capital provide the dominant contribution to the wealth of a nation; in figure 4 the respective share of the natural capital in the overall wealth of a nation is indicated. Irrespective of methodological questions (e.g. the environment being considered a not yet exploited economic resource), at least the trend gives some clear and valid information. Other calculations of the value of ecosystem services are just as disputable (Ecological Economics 1998), but support the impression that the value of other capital stocks than the man-made one are significant. Still it is remarkable how significant the variation is in table 4, with countries often considered as ‘environmentally degraded’ like Russia showing a 70% share of natural capital, or OECD member Iceland of 61%. In other countries, however, the natural capital is quite insignificant: in Belgium and the Netherlands it makes up for 2% of the total wealth, in Switzerland, the UK and Italy for 3% or in Armenia, Moldavia and Luxembourg for 4%. Malta, with 0% contribution of natural capital, is the extreme: the scenic coast as a basis for the tourism industry has not been included in the calculation of nature's contributions, since its ‘value’ is already reflected by its indirect contribution to the GDP. This again illustrates the reductionist shortcomings inherent to the monetarisation approach. Other calculations like the Index of Sustainable Economic Welfare ISEW (Daly, Cobb 1990, van Dieren 1996, Diefenbacher 1996) and its successor, the Genuine Progress Indicator GPI come to similar results (Cobb 1995). Given their methodological independence from the data presented in figure 4 and in this respect regardless of their

numerous weaknesses, they are supporting the idea that a proper understanding of the wealth of nations must go beyond human made capital accounting, and even beyond monetary accounting as such. Figure 4: The Wealth of Nations According to different ways of ranking. For all indexes, more than 190 nations have been assessed. The rankings include the economic measure of wealth GDP/cap, comparing it to the 1992 version of UNDP's Human Development Index HDI (basically adding the criteria of health and education) and its derivates adjusted for income disparities and gender equity. In the 1995 version the methodology has been changed, mainly by introducing saturation effects from increasing income and education, which is also reflected in the derivates. The last two columns give a ranking total wealth as the sum of financial valuation of manmade, human, social and natural capital, the share of which in % is given in the last column Ranks Country Switzerland Sweden Norway France Netherlands United Kingdom Germany Austria Belgium Iceland Denmark Finland Luxembourg Ireland Italy Spain Greece Czecho/slovakia Lithuania Estonia Latvia Hungary Russia Belarus Malta Portugal Ukraine Bulgaria Poland Armenia Georgia Azerbaijan Romania Moldova Albania

GNP/ cap., 1992 1 4 5 13 16 19 12 14 15 8 7 6 2 26 27 23 35 56 63 43 47 55 48 49 32 38 68 76 79 73 80 92 89 81 86

HDI '92 2 4 5 6 9 10 11 12 13 14 15 16 17 21 22 23 25 27 28 29 30 31 34 40 41 42 45 48 49 53 66 71 72 75 76

Income dispar. adjusted 9 2 6 7 5 8 4 3 15 12 19 22 31 44 -

Gender HDI '95 GDI '95 GEM adjusted '95 17 1 2 5 10 11 13 14 16 6 4 3 20 24 18 23 26 17 37 -

14 8 5 7 4 15 17 12 11

18 1 3 7 10 13 16 12 14

12 2 1 40 8 18 7 10 16

16 6

6 5

3 4

18 19 9 20

23 20 19 21

23 13 25 60










Serageldin 1990 4 6 11 13 19 22 15 16 18 7 10 21 3 29 20 25 40 76/98 113 73 94 67 55 74 42 41 105 116 77 143 131 139 128 117 99

thereof natural capital 3 29 30 7 2 3 5 7 2 61 7 38 4 9 3 9 11 19/5 9 14 12 12 70 10 0 7 6 24 31 4 6 6 13 4 10

Source: Spangenberg, Bonniot 1998, data from the Human Development Reports 1994, 1996, Serageldin op. cit.

Thus measures of wealth based on market transactions like GDP have to be complimented by other measures, introducing • the other dimensions (social, environmental, institutional),

• the other levels of the enviro-socio-economic system (meta- and meso-level), • other indicators (e.g. physical, social and psychological measures complementing the economic ones) to assess the ‘real wealth’ of a nation (Max-Neef 1989, 1991, Ekins, Max-Neef 1992). Having completed these amendments, the ‘total standard of living’ of a society can be calculated, beyond ‘wealth’ expressed in income terms (Spangenberg, Lorek 2001). Admittedly, going that deep into the issue is no easy task –public wisdom knows that ‘the more you peal the onion, the more you cry’ – but a necessary one to identify the kind of investments needed to replenish the capital stock, or to enhance the reproduction capacity of the individual subsystems.


Sustainability understood as total system viability is dependent on two intertwined conditions: each component in itself must be able to reproduce itself, and the interaction of the four components must be synergistic or at least non-damaging. If the latter condition was not met, the system as a whole would suffer, with negative repercussions for the former one. So, for example, the dismantling of social and environmental standards may result in a strengthening of the self-reproduction capabilities and thus the viability of the economic subsystem, but as a direct effect will cause damages to the other systems it is intertwined with. These will not only be detrimental to overall system sustainability, but will as well have direct and indirect feedbacks on the economic system which are not easy to predict (resource cost influencing technology development incentives resulting in changed competitiveness, worker satisfaction influencing the innovation capacity on the micro level, etc.). One indirect effect is of outstanding importance: the strengthening of the economic subsystems results in a specific change of the institutional setting. The imposition of the economic logic (efficient handling of scarce resources) interferes with the specific logic of the environmental sub-system (principle rather ‘diversity’) and society (principle rather ‘justice’). This external intervention threatens to undermine the viability of the subsystems, like overly extensive external interventions can do to the economic subsystem. So e.g. understanding elements of the human capital like skills (let alone love and affection) as only concerning efficiency and value production falls short of their full meaning and can easily lead to false policy action. One example might be education politics, where neglecting the contribution of qualification to the quality of life, to self esteem and finally to social cohesion might lead to counterproductive results in terms of integrated sustainable development. In order to strengthen their inherent selfreproducing capabilities, the societal and natural systems can be considered to be in urgent need of ‘deregulation’ including a reduced exposition to the economic logic. This in return would result in the need to re-regulate the economic subsystem according to social and environmental criteria. Sustainable development thus cannot aim at maximising the output of a single component or subsystem, but must focus on optimising the total system performance based on a multi-criteria set of policy targets. The definition of such targets has to take their mutual supportiveness (or at least the existence of suitable compromises) into account (HBS 2000). Furthermore, they have to be defined for all levels of decision making in a coherent manner (although human behaviour will probably not be that

coherent, differing on different levels and in different situations, Spangenberg 2000). The resulting policy target matrices (see figure 5) can be used to derive sustainability scenarios which include all four dimensions and levels in a coherent manner. As a number of modelling approaches using different simulation tools have shown that such scenarios can be constructed in a coherent and workable manner (Spangenberg et al. 2000). Figure 5: Sustainability Matrix: Potential Targets by Dimension and Level including - as a partly still incoherent illustration - some well known sustainability targets filled in to demonstrate the functioning of the approach level meta





market economy, life

distributional justice

existence of limits

democracy & peace,

new leitbilder

gender equity

cycle responsibility macro




social security



open markets


TMR reduction


innovation networks,

participation in


violence free conflict


society and company public transport,

solving, gender




quota in civil society

profitable companies


dematerialised pro-

time - autonomy

consumption meeting

care, shelter

duction, immaterial

partnership in




Consequently, in order to enhance sustainability the attention has to be focussed on two main concerns, on the resilience of the subsystems and on their linkages: • The self-reproducing capabilities not only of the man-made capital, but also of human, natural and social capital are to be enhanced in a way that the reproduction of the respective capital stocks is guaranteed. Concerning their function as production factors this means investment in all four reproductive cycles, as all production factors must receive a fair share of the surplus created by using them, in order to maintain the production potential (see figure 6). As investment here cannot mean the purchase of goods or services to be added to the respective capital stock, it becomes obvious that the notion of capital if applied to nature, humans and society has to be redefined. • As a condition of sustainability, a way of using these four kinds of capital must be developed by which their use and self-reproduction become mutually reinforcing processes instead of countervailing forces. This means that there should not be four different directions of politics in a juxtaposition, but the focus must be on the interlinkages to make the different politics mutually supportive. This would be significantly easier once the integration of sustainability targets in the different policies has been successfully completed. Whereas the second demand is the key to policy integration with horizontal multi criteria assessments one core instrument, the first one is more complicated (or at least less discussed).


Investment in man made capital is in this context understood in the usual sense of monetary investment; approaches like embodied energy or material accounting, time budget analysis etc. are not applied. Given the available wealth of economic literature, a detailed discussion ofits economic function is considered unnecessary in the context of this paper. As H. Daly points out, any investment in resource productivity, enabling us to replace throughput while maintaining the service level, can be considered as ‘indirect investment in natural capital’ (Daly 1996, p. 83). Similarly, investments increasing labour productivity human capital could be defined as ‘indirect investments in human capital’. This explanation refers to investments into the economic subsystem, and the resulting effect is thus rightfully labelled an ‘indirect investment’. While this is an important measure to delink the pressure on the non-economic subsystems from economic growth, this is not sufficient to safeguard their reproduction cycles suffering from the absolute stress level (Nature e.g. does not care how much wealth has been created while destroying it). Direct investment in social, human and natural capital cannot be investment in the usual sense of monetary investments as for man-made capital; the very nature and composition of these kinds of capital stocks generates different revenues and requires other ‘currencies’ for the investments to be made (see figure 6).

Figure 6: Four Capital Reproduction Cycles

For human capital this is well known: it needs not only financial investments (salaries and other benefits), but also socialisation, education and in particular the hands-on experience from paid and/or unpaid work. If these conditions are not given, the human capital is degrading until individuals (in their given physical and psychological state) are unable to contribute to the overall human development (Arendt 1981, OECD 1998, Zweimüller 1998, Healy 1998). This effect is even not limited to those suffering from it: the capability for organised labour, as much as it is structuring western societies (e.g. unlike Mediterranean or even more African ones) is no ‘natural’ human attitude, but has been introduced top down in the industrialisation process. It needs to be reproduced in every generation, and this can only be successfully done by people that are part of the labour system themselves. Children of unemployed which have been growing up in poverty exhibit significant signs of distortion that may even affect their own children. In this sense, labour is one of the self-reproducing features in the societal fabric. This is particularly true for paid labour with its unique combination of generating income, providing self-esteem, developing skills and offering opportunities for social interaction. Investing in human capital thus not only means offering education, but as well combating poverty and unemployment, giving people the opportunity not only to learn, but to apply their skills. It furthermore demands valuing experience (an important aspect

given the demographic development) and skills on all levels, promoting self-esteem and permitting self-determination. The case is less easy for natural capital, in particular since environmental scientists have analysed the reproduction cycles of nature without any view to their role in the economic and societal framework, while the economists' views so far focused on monetarising the natural capital, however without too much success (Hinterberger et al. 1997). By focusing on valuing the elements of natural capital, in particular on natural resource accounting, they even did not focus on the essence of the natural capital in a productive sense (the system dynamics), but on an inventory or deposit of capital products. As such, resources are not producing anything unless used by humans, making them a part of the man-made capital stock once they are recognised and used. Whether the inventory is full or empty, liquidated or not yet, is a purely economic question, not an environmental one (Daly 1996). Furthermore, selling out a deposit creates liquidated wealth, but does not generate sustainable income in the Hicksian sense. The environmental side effects of that liquidation is what is ecologically relevant (and they can turn into an effective constraint for the respective economic activity), not the size of stocks as such. Coal in the ground has no environmental relevance, but coal incineration (a man-made process) has (Spangenberg et al. 1999). Biodiversity, as another example, is considered an essential element of the natural capital stock. However, it is not so much its individual elements are essential (biological substitution happens), but the dynamics (including the resilience and the viability) which is producing the eco-system services. Consequently, these dynamics need to measured and valued as the essence of the capital stock, a challenge that the scientific community has not been up to so far. Industrial production and consumption in particular in the currently dominating ‘once through systems’ is the transformation of resources from a low entropy to a high entropy form, with an interim use of a minor share of the total physical volume as products. The input is low entropy solar (energy) and terrestrial resources (fossil fuels, materials, land); the output is waste (in concentrated deposits) and pollution (in dispersed flows). Whereas for solar energy not the total amount is at human disposal, but only the use efficiency is, there are no external limitations to the exploitation rate regarding terrestrial resources (Daly 1996), except for the environmental side effects. Consequently, industrial societies have shifted from solar to terrestrial resources and exploited them to the full, thus as an unintended side effect undermining the resilience of the natural capital. For sustainable development, both trends need to be reversed, substituting terrestrial for solar resource input, and reducing the total volume of resource use. The latter approach is known as the dematerialisation strategy (Schmidt-Bleek 1992, FischerKowalski, Haberl 1997). It is important to note that this approach is based on resource use targets in absolute terms, i.e. demanding an absolute delinkage of economic development and resource use, since a relative delinkage (i.e. the resource use growing slower that the economy) would still increase the environmental disturbance potentials. The targets are set in way that according to best available knowledge and taking into account the precautionary principle the human interference with the natural environment does not go beyond the limits set by the carrying capacity of the natural eco-systems, a criterion that is generally applicable although not always quantifiable. Implementing these targets limits the physical size of an economy (which is not to say anything about its size in monetary terms, but only in tons, gigajoules and hectares) by reducing the

total throughput (Daly, Cobb 1990). By limiting the input to our industrial societies, also the output is being limited, and in a number of cases the need not to overburden the sink capacity of the natural systems has helped to quantify the reduction needs on the input side. Furthermore, we need areas which can serve as crystallisation points for recovery and revitalisation processes (Spangenberg 1999). To serve this purpose, these areas must be free to follow their evolutionary dynamics and be as far as possible undisturbed by mankind. They also have to be geographically close by to the areas strongly influenced by human use to be able to serve their purpose of providing regeneration capacities. This makes a network of protected eco-systems throughout the countryside necessary as foreseen e.g. in the European Union’s Natura 2000 program, rather than large natural parks in remote areas. Additional concerns, like eco-toxicity of chemicals and heavy metals, the accumulation of specific substances or the aesthetic value of the landscape are additional criteria to be applied on a case by case basis as appropriate. Most of these problems will significantly benefit from a dematerialisation strategy, which will minimise (and in some cases even solve) the problems. The social capital represents the institutional dimension of a society; for sustainability in particular referring to the organisations, mechanisms and orientations necessary for sustainable development. This includes not only providing the necessary mechanisms for the economic, environmental and the social dimension, but as well to institutions essential for core institutional purposes (Spangenberg et al. 2001). The most important policy goal in this respect is to safeguard and reproduce the social cohesion of a society by offering appropriate structures and the means to make use of them. On the one hand, such structures include a distribution of wealth, power and influence that is considered acceptable by the society at large. This institutional demand has an economic basis as well: the marginal utility of income is much lower for rich than for (relatively or absolutely) poor people, thus redistribution may well enhance the total social utility (Daly 1996, p. 85). Investments in distributive efficiency are thus investments into the social capital, representing the institutional dimension of sustainability. On the other hand, people need the chance to actively participate in the respective society based on the principle of equal opportunities. Democracy on all levels, including decentralisation of decision-making, suitable organisations like NGOs, trade unions or business associations participation opportunities, co-decision in the workplace, financial and material resources for encouraging participation (maybe a kind of publicly funded compensation for voluntary activities) etc. and organisations and institutional mechanisms provide the necessary opportunity structures. If the policy goal is to allow for the self-reproduction of social capital, this process needs not only the opportunities provided by organisations and mechanisms, but above all dedicated people and their time. The willingness of citizens to grasp these opportunities (an institutional orientation) and their ability to do so depends not only on value systems, education and resource availability, but as well on disposable time as a key resource to get the societal reproduction cycle going. This presupposes the fair sharing of working time (for example by shortened working time instead of separation between employed and unemployed), as well as the fair sharing of non-working time between gender and generations on the household and community level. Furthermore, the slowing down of

some societal processes may be necessary (Spitzner 1997) which by their very speed put a significant stress on human beings, society at large and its natural environment. However, this is not to say that all processes of society have speeded up and should be slowed down (a general ‘deceleration’, Sachs 1993). On the contrary: acceleration has always been focussed on some main trajectories of society while slowing down others, thus often contributing to the marginalisation of societal groups like women and elderly. Innovative time-politics would thus also include acceleration as appropriate. Last but not least the creation of spheres where people decide what to do in a selforganised way without being under the pressure of external demands should be foreseen. This is what has been called the creation of ‘chronotopes’ (Eberling, Henschel 1998), in analogy to the biotopes in environmental sciences.


Research for sustainability needs a transdisciplinary approach (Mittelstraß 1992), integrating a variety of disciplines and non-scientific knowledge, and extending the scientific discourse to involve non-scientists (post-normal science, Funtowicz, Ravetz 1993). This approach differs significantly from the analysis of man-made, natural, human and social capital in monetary terms, but still the concept of capital stocks provides a number of helpful insights: it makes clear that all four dimensions of sustainability serve as essential production factors, and that they deserve investment (in their respective ‘currencies’) to maintain their production capabilities. This incommensurability also rules out the valuation of all capital stocks by a common numeraire, which is the core reason why the economics debate about substitutability should be considered as a methodological artefact of economics, not as a problem of sustainable development as such. What instead is needed is the combination of sustainability criteria and the corresponding numeraires from different disciplines, providing the basis for a horizontal (i.e. non-hierarchic) multi-criteria analysis. This kind of analysis cannot deliver single, clear-cut optimum solutions, but defines a ‘corridor of sustainable solutions’ that needs further policy decisions, best based on a broad dialog of all relevant actors. This clearly indicates that any economic assessment based on monetary accounting, contingent valuation etc., and leading to one optimum solution falls short of capturing the full spectrum of sustainable options (even if the one singled out might fit the criteria). Multi-criteria analysis must be based on methodological pluralism, combining criteria, approaches and measures from different disciplines in a non-hierarchical way. It is most appropriate for designing and analysing policies towards sustainable development, since investment in sustainable development must be investment in the ‘currencies’ of the different capital stocks, e.g. in money, distributional justice, resource use restrictions and time. Each of these comes with a price, but the price of an object should not be confused with the object itself. However, once targets in different dimensions have been determined and they way to implement them has been explored, it may be possible to estimate the cost for the way to come there, based on current data and technologies (O’Connor 1999). This way, neither the damage as such nor its value is calculated, but the estimate may provide useful information about the economically most efficient way to solve the sustainability problems encountered.

Acknowledgements The author is indebted to Friedrich Hinterberger and Ines Omann for helpful discussions and to two anonymous referees for their valuable comments on an earlier version of this paper. All usual disclaimers apply.

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