NEOCLASSICAL NATURAL CAPITAL THEORY AND WEAK INDICATORS FOR SUSTAINABILITY

We appraise neoclassical theory of growth with natural capital for the estimation of indicators for sustainability. Relationships between fo ur theoretically distinct measures are clarified: Hicksian ''change in capital stock value''; the Hartwick ''net savings'' (which excludes c apital gains); ''sustainable national income'' (SNI); and ''environmen tally-adjusted net national product'' (gNNP). An overlapping generatio ns (OLG) general equilibrium model with depletable natural capital dem onstrates the significance of model parameters determining technical f easibility and intertemporal distribution of consumption. Irremediable uncertainties in model specification and empirical measurement mean t hat the neoclassical theory is not robust for defining or estimating i ndicators for sustainability.