Sustainability and its relation to efficiency under uncertainty |
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Authors: | Frank C. Krysiak |
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Affiliation: | (1) Department of Economics, University of Basel, Petersgraben 51, 4003 Basel, Switzerland |
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Abstract: | Evaluating the long-run consequences of present actions, as in the context of sustainability, requires information about the actions’ outcomes and about future preferences that is often uncertain. We analyze a risk-based criterion of sustainability and a corresponding efficiency concept that cover these uncertainties. We derive several properties of these criteria and formally characterize the trade-off between sustainability and efficiency. Furthermore, we show that maximizing the probability of ex post efficiency under a sustainability constraint provides an interesting choice rule and that, for a special case, this rule is connected to portfolio theory. We are indebted to an anonymous referee whose comments helped substantially to improve the article. |
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Keywords: | Sustainability Efficiency Uncertainty Policy evaluation Portfolio choice |
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