Reconsideration of dynamic utility optimisation and intergenerational equity in sustainable development studies

Many sustainable development studies have employed intergenerational social welfare functions based on dynamic utility optimisation models (RCK models), which were pioneered by Ramsey and elaborated by Cass and Koopmans. This line of studies, however, rarely scrutinise the relevance of the fundamental assumption that dynamic optimisation in RCK models directly addresses intergenerational equity issues. This paper critically examines this assumption and presents an alternative interpretation: dynamic optimisation in RCK models signifies that an individual’s current utility level is determined not only by the activities and environments at this moment but also by future expectations about them. This interpretation leads us to reconsider treatment of intergenerational equity in sustainable development studies. This paper claims that intergenerational equity in sustainable development is better represented as certain “survival conditions” rooted in physical facts instead of sustainability conditions based on value judgements. As one candidate of such survival conditions, an approach based on an ecological resilience concept is illustrated.