Further theory on effects on productivity of society

Although rarely stated explicitly, an implicit boundary condition in most LCA and IOA studies is that the overall productivity of society (the annual GDP or GEP) and the overall societal rate of growth is exogenously given, so that it is not affected by the specific product substitutions or decisions studied. Without this boundary condition, the consequences of any specific decision could be infinite – for example if the benefits from an improvement in productivity were reinvested in further improvements and the effects of these further improvements were then again included.

However, this boundary condition can for some studies be an unreasonable constraint. An example is an analysis of activities that exactly aim to increase the overall productivity of society, especially investments in education, research, and development activities in relation to societal infrastructure. The consequences of such investments are by nature long-term, and may occur at very different points in time, have significant signal effects, and may bind other decisions and thus have a cascading effect. To model their consequences requires more use of forecasting and quasi-dynamic models than is usual in LCAs for less wide-reaching decisions. For such decisions it would be reasonable then also to measure the influence on the GDP over time, taking into account the possible multiplier effects, and to use an appropriate discount rate to compare the net present value of the different options.

How to cite this: 
Consequential-LCA (2015). Further theory on effects on productivity of society. Last updated: 2015-10-27. www.consequential-lca.org