1. A. What do you mean by sustainable development (SD)?

Present briefly the

evolution of the concept of SD overtime.

Answer: Sustainable development is the idea that human societies must live and meet their needs
without compromising the ability of future generations to meet their own needs. Sustainable
development is a way of organizing society so that it can exist in the long term. This means taking
into account both the imperatives present and those of the future, such as the preservation of the
environment and natural resources or social and economic equity.

SD theory developed through practice, and the study of SD cannot be separated from the
implementation of relevant policies. SD has experienced the germination of ideas, and then a series
of SD practices, such as the United Nations Sustainable Development Summit. Many changes have
taken place and SD has evolved from tackling environmental issues to deal with the global strategic
issue. Though the terms “sustainability” or “sustainable” first appeared in the 20th century, the
equivalent concepts have been used for centuries. The idea of SD has a long history in China, and the
concept of SD can be traced back to the core idea of Chinese classical philosophy. As early as the
Western Zhou Dynasty, the emperors realized that the mountains, forests, and rivers should be
rationally used according to the laws of nature rather than overexploiting it. Since then, various
measures have been taken to protect natural resources, such as establishing designated
management departments, enforcing state monopoly, collecting taxes in regard to mountains and
gardens, and issuing bans. Afterward, different causes of environmental degradation, including
farming, logging, and mining, were discussed in the ancient Egyptian, Mesopotamian, Greek, and
Roman civilizations. The German Dictionary, which was published in 1809, interpreted the term
“sustainability” as something that people can still rely on when everything else is unsustainable. It
can be seen that the early thought of SD mainly reflected in the sustainable use of natural resources.
With the recognition that the developmental policies primarily focusing on economic growth
increased the frequency of serious environmental problems, the United Nations held a world
summit in Stockholm, Sweden in 1972. The conference was the first human environment conference
and symbolized the beginning of the SD concept. The summit urged all countries in the world to
strengthen environmental management policies while developing their economies. Since then,
institutional developments related to environmental protection and vigorous end-of-pipe
environmental governance have advanced. In 1992, the United Nations hosted a conference, in Rio
de Janeiro, Brazil, to address environment and development, starting the journey of SD in a global
scope. The conference passed and signed the “Rio Declaration on Environment and Development”
and the “Agenda 21”. Moreover, one agreement was identifying the “common but differentiated
responsibilities” of developed and developing countries in addressing global environmental issues,
as well as the need for developed countries to finance and transfer technology to developing
countries. This meeting has also formulated goals and action plans to implement sustainable
development and establish the principle of building a global partnership to jointly solve global
environmental problems. This was the first time in human history that SD strategy has been
implemented from a concept into a global action, which established the importance of SD at the
international policy level. Since then SD has become the consensus of the whole of mankind.
Furthermore, the conference treated SD as a core concept for resolving the apparent contradiction
between economic development and environmental protection, pointing out that SD involves
development in a sustainable manner regarding resources and the environment. The conference
also emphasized the societal polarization and the importance of equity, thus introducing the social
dimension of the theory of SD. Based on this theoretical advance, the three pillars of SD were
considered to be economy, society, and environment.
B. Are goals of efficiency and equity are necessarily contradictory? What do you mean
by Tradeoffs and Synergies?

Answer: Efficiency implies health maximisation with given resources. The aggregation of individual’s
health admits different approaches. Equity, on the other hand, is the prevailing social judgment
about which inequalities are fair and which are not. Contradictions between efficiency and equity
appear some times (more equity implies less efficiency and vice versa) but not always.

Trade-off is a situational decision that involves diminishing or losing one quality, quantity, or
property of a set or design in return for gains in other aspects. In simple terms, a tradeoff is where
one thing increases, and another must decrease. Economics is all about tradeoffs. A tradeoff is
loosely defined as any situation where making one choice means losing something else, usually
forgoing a benefit or opportunity. We experience tradeoffs in zero-sum situations, when a plus in
one area must be a negative in another. For example, we might take a day off work to go to a
concert, gaining the opportunity of seeing our favorite band, while losing a day's wages as the cost
for that opportunity.

Synergies are the interaction or cooperation of two or more organizations, substances, or other
agents to produce a combined effect greater than the sum of their separate effects. Synergy is a
term that is most commonly used in the context of mergers and acquisitions (M&A). Synergy is often
one of the goals of a merger or acquisition. The two firms combined may be able to achieve higher
profitability than either firm could achieve on its own. For example, a company may acquire a similar
firm, allowing it to expand its product offering and, as a result, increase its sales and revenues.

C. Present the threats to environment caused by Economic development.

Answer: Economic development means an increase in real output (real GDP). Therefore, with
increased output and consumption we are likely to see costs imposed on the environment. The
environmental impact of economic development includes the increased consumption of non-
renewable resources, higher levels of pollution, global warming and the potential loss of
environmental habitats. However, not all forms of economic development cause damage to the
environment. With rising real incomes, individuals have a greater ability to devote resources to
protecting the environment and mitigate the harmful effects of pollution. Also, economic
development caused by improved technology can enable higher output with less pollution. Here are
some of the threats to environment caused by Economic development-

Pollution: Increased consumption of fossil fuels can lead to immediate problems such as poor air
quality. Some of the worst problems of burning fossil fuels have been mitigated by Clean Air Acts –
which limit the burning of coal in city centers. Showing that economic development can be
consistent with reducing a certain type of pollution.

Less visible more diffuse pollution: While smog’s were a very clear and obvious danger, the effects
of increased CO2 emissions are less immediately obvious and therefore there is less incentive for
policymakers to tackle. Scientists state the accumulation of CO2 emissions have contributed to
global warming and more volatile weather. All this suggests economic development is increasing
long-term environmental costs – not just for the present moment, but future generations.

Damage to nature. Air/land/water pollution causes health problems and can damage the
productivity of land and seas.
Global warming and volatile weather: Global warming leads to rising sea levels, volatile weather
patterns and could cause significant economic costs

Soil erosion: Deforestation resulting from economic development damages soil and makes areas
more prone to drought.

Loss of biodiversity: Economic development leads to resource depletion and loss of biodiversity.
This could harm future ‘carrying capacity of ecological systems’ for the economy. Though there is
uncertainty about the extent of this cost as the benefit of lost genetic maps may never be known.

Long-term toxins: Economic development creates long-term waste and toxins, which may have
unknown consequences. For example, economic growth has led to increased use of plastic, which
when disposed of does not degrade. So there is an ever-increasing stock of plastic in the seas and
environment – which is both unsightly but also damaging to wildlife.

2. A. Present the World Bank classification of countries.

Answer: The World Bank assigns the world's economies to four income groups—low, lower-
middle, upper-middle, and high-income countries. The classifications are updated each year
on July 1 and are based on GNI per capita in current USD (using the Atlas method exchange
rates) of the previous year. The categories are used to show how different groups of
countries are doing against measures such as reducing poverty, growth, increasing income
per head of population, and so on. There are, the World Bank says, two reasons for an
economy to be moved between classifications. One is in-country change, such as increased
or decreased economic growth, marked shifts in domestic inflation, or exchange rates. The
data can also be influenced by changes in population, which will change the GNI ratios. The
second likely cause of a country moving between categories is adjustments to the
thresholds.

B. Explain how Gini Coefficient is calculated? How is HDI for a country

calculated?
Answer: The Gini coefficient is a statistical measure used to calculate inequality within a nation. It
does so by calculating the wealth distribution between members of the population. Through this
calculation, we achieve a result between 0 and 1, which 0 representing perfect equality, and 1
absolute inequality. There are two ends of the measurement, ranging from 0 to 1. At 1, the
measurement would show that one person receives all the national income. By contrast, a
measurement of 0 would suggest that income is perfectly split between all members of society. In
other words, 0 = complete equality, and 1 = complete inequality. The Gini coefficient is calculated
using the Lorenz Curve. This can be illustrated in the graph below. To explain, each percentile is
plotted on the graph with a line situated at 45 degrees. This line represents perfect equality. So the
bottom 10 percent of the population receives 10 percent of income, whilst the top 10 percent also
receives 10 percent of income.
Along this line, the percentiles are populated below this, creating what is known as the Lorenz Curve.
The reason the curve is situated below is that a situation cannot exist whereby the bottom 50
percent receive more than 50 percent of income. If they did then they wouldn’t be in the bottom 50
percent.
Once each percentile has been placed onto the graph, we are left with the curve. The area between
the curve and the line of equality is then used to calculate the Gini coefficient.
The area above the Lorenz Curve and towards the line of equality is referred to as ‘A’ and the line
below as ‘B’. This can be seen in the chart below.

To calculate the Gini coefficient, we must first measure the area of ‘B’. We can do this by splitting
down each segment into triangles and squares. Let us take a simple example below. If we split it
down, we can create 3 segments illustrated below.
Area 1 = width (50) x height (25) x 0.5 (as it’s a triangle) = 625
Area 2 = width (50) x height (25) = 1250
Area 3 = width (50) x height (75) x 0.5 (as it’s a triangle) = 1875

So the total area of ‘B’ equals the combined total of the three areas. This equals 625 + 1250 + 1875 =
3750. The area of ‘B’ is therefore 3750.
Gini Coefficient Formula: The Gini Coefficient formula is calculated using = A / (A + B). Where
‘A’ is the area above the Lorenz Curve and ‘B’ is the area below.

From the previous example, we have already worked out B = 3750. We can then work out the area
of ‘A’. The line of equality can be calculated by using the total area of the triangle. This equals 100 x
100 x 0.5 (as it’s a triangle). In turn, we get 5000 as our figure. So this is the total area of the triangle
(which includes both A and B). We already have the area of B (3750), so the area of A is the
difference (1250). We can now plug those figures into the formula:
Gini Coefficient = 1250 / 1250 + 3750 = 0.25

The Human Development Index (HDI) provides a single index measure to capture three key
dimensions of human development: a long and healthy life, access to knowledge and a decent
standard of living. The HDI utilizes four key metrics:
1. life expectancy at birth – to assess a long and healthy life
2. expected years of schooling – to assess access to knowledge of the young generation
3. average years of schooling – to assess access to knowledge of the older generation
4. gross national income (GNI) per capita – to assess the standard of living
There are two steps to calculating the HDI:

1. Forming indices for each of the four metrics

Values of each of the four metrics are first normalized to an index value of 0 to 1. To do this,
“goalposts” of the maximum and minimum limits on each metrics are set by the UNDP, as shown in
the table.

With the actual value for a given country, and the global maximum and minimum, the dimension
(indices) value for each metric is calculated as:

The dimension index is therefore 1 in a country that achieves the maximum value and it is 0 for a
country that is at the minimum value.

2. Aggregating the four metrics to produce the HDI

Once each of the individual indices has been calculated, they are aggregated to calculate the HDI.
The HDI is calculated as the geometric mean (equally-weighted) of life expectancy, education, and
GNI per capita, as follows: