The economic circle of sustainability is founded on the concept of maximizing the flow of income from a stock of capital while maintaining the stock yielding this income. The concept encompasses traditional theory on economic growth, that is, determining optimal economic growth with a given capital. The premise is that future generations can only be better off if they have more capital per capita than we have today. It is immediately obvious that population growth is inimical to sustainable development since it ‘dissipates’ the capital stock. Technological change, on the other hand, enables a given capital stock to generate more wellbeing per unit of the stock. An easy way to think of it, then, is to say that future generations will be no worse off if capital stocks are ‘constant’ and for the rate of technological change to just offset the rate of population growth. If technological progress is faster than population change, then future generations could still be as well off as we are today with a lower capital stock, and so on.
1. natural (or environmental) capital, which provides a continuing income of ecosystem benefits, such as biological diversity, mineral resources, forests, wetlands, and clean air and water;
2. built (or productive) capital, such as machinery, buildings, and infrastructure (roads, housing, health facilities, energy supply, water supply, waste management, etc);
3. human capital, in the form of knowledge, skills, health, cultural endowment, and economic livelihood (small enterprise development, literacy, health care, inoculation programs, etc.);
4. social capital, the institutions and structures that allow individuals and groups to develop collaboratively (training, regional planning, decision sharing culture, etc.); and
5. financial capital, the value of which is simply representative of the other forms of capital.
This broadening of the concept of capital is critical to an understanding of sustainable development….