Introduction

According to Daily and Ehrlich (1996), sustainability is implied when processes or conditions 'can be maintained indefinitely without interruption, weakening, or loss of valued qualities'. A key requirement for the continuous provision of goods and services is that resources expended in association with these processes and conditions must be replenished (or substituted) so that the necessary resources continue to be available.

To discuss sustainability in urban water and sanitation services in more commonly used language, the above may be posed as a requirement that costs are recovered. In this statement, 'costs' must be understood in their broad sense as all resources utilized in the provision of these services – material resources as well as capacities to provide associated services and functions, such as ecosystem services.

A range of qualitatively different costs can be incurred, most commonly described as a combination of monetary costs, environment costs and social costs. Monetary costs are measurable in dollar or equivalent terms, and consist of direct costs and a range of other costs that are artefacts of policy, accepted accounting methodology, or commercial and institutional arrangements. Environmental costs are 'connected with the actual or potential deterioration of natural assets due to economic activities' (United Nations, 1997). Environmental deterioration occurs when humans deplete resources and create waste at rates that exceed the capacity of the environment to regenerate, assimilate and recover. Social costs are the impacts on people. Unlike monetary costs, environmental and social costs are multidimensional and non-additive.

Recovering costs in line with sustainability would mean that monetary costs are quantified and revenues are raised to recover them, and that impacts on environments are limited to lie within the natural capacity of ecosystems to regenerate resources and assimilate wastes. The idea of 'recovering' social costs is more complex, because societies may respond to impacts by choosing to adapt and change rather than requiring restoration or compensation, especially if benefits are perceived to outweigh costs. Nevertheless, cost recovery would also mean that impacts on society would be explicitly identified and addressed, most defensibly through a process involving deliberative public participation.

We contend that different economic perspectives and worldviews indicate different approaches to cost recovery, and examine the extent to which three different economic perspectives respond to the requirement for sustainability within our broad definition of costs and cost recovery. We argue that the dominant perspective of neo-classical economics (NCE) is insufficiently aligned with sustainability as envisaged above, being limited by its emphasis on cost recovery through 'full cost pricing' and large-scale technological solutions. We propose that ecological economics (EE) and Buddhist economics (BE) can each contribute to an expansion of perspective that better enable sustainability and cost recovery, while complementing each other. Cost recovery aligned with sustainability is enabled by an expanded perspective that is an integration of the three perspectives.

NCE perspective

NCE is the dominant economic perspective underpinning government policies in industrialized countries around the world today, and more recently, in developing countries advised by multilateral lending agencies. It is often referred to as 'market economics' because of its preference for the market as the means of allocating scarce resources (Daly and Farley, 2003: 3).The NCE approach is characterized by reduced government spending, reduced government provision of welfare and reduced taxes, along with privatization of state enterprises. This strategy is credited with spectacular increases in gross domestic product since its increasing adoption since the 1970s (Schwartz, 2005).

Price is the principal communication tool in a market (Edwards-Jones et al., 2000), making pricing the mechanism of choice for revenue raising in the NCE model. Thus 'full cost pricing' and the 'user pays principle' where revenues to recover all costs are raised through charges to users of services, are fundamental values in NCE. Including all monetary costs in the price would mean that revenues raised from users would be sufficient to recover costs incurred by service suppliers. NCE premises that environmental and social factors can be 'internalized' by converting them into monetary equivalents for inclusion in the price, which would lead to changes in consumption patterns in ways that reduce these costs.

NCE approaches in the water and sanitation sector are promoted as 'internationally accepted' policies that include the '[separation of] service provision from government'; 'financ[ing] services through user charges, not from general tax revenues'; and 'full cost recovery' through 'full cost pricing' based on the 'user pays principle' (Walker, 2003, http://www.adb.org/Water/Seminars/blue_bag_11.asp, accessed 29 September 2003). It has been accompanied by greater private sector participation in the sector.

The effectiveness of the NCE approach for water and sanitation must first be questioned through asking whether 'user pays' is a fair and just principle in the context. We see the 'user pays' principle as a special case of the 'beneficiary pays' principle that is consistent with notions of distributive justice, namely that all those who benefit from a service should pay for it. In the case of water supply, Seregeldin (1994 as quoted by McGranahan et al., 2001: 99) argues for the 'user pays' principle on the basis that '"private" benefits constitute the bulk of the overall benefits of a household water supply', although the ongoing debate demonstrates there is little consensus on this issue ( McNeill, 1998; Gleick et al., 2002). There is less ambiguity in the case of sanitation, however, since a significant proportion of its benefits are public. Sanitation provides critically important benefits of protecting public health, the environment and water resources through appropriate disposal of waste, which are additional to the private benefit of sanitary waste removal from the user's immediate domain. Thus we argue that the 'user pays' principle with pricing as the sole mechanism for recovering 'full costs' cannot be defended: governments have a clear responsibility to account for the public benefits.

Secondly, we ask if NCE limits environmental costs to levels that are sustainable. While the legitimacy of internalizing environmental costs by converting multidimensional environmental impacts to their alleged monetary equivalents is itself disputed (Söderbaum, 2003), NCE's objective in doing so is to achieve a level of environmental damage that is economically efficient – when the marginal private costs of reversing damage is equal to the marginal social costs of such damage (Edwards-Jones et al., 2000: 226–228). Limiting environmental costs to levels that allow ecosystems to recover are thus not an explicit goal in NCE.

Finally, neo-classical economists are often characterized as having an ideological reliance on advanced technological solutions to solve environmental and social problems (Smith et al., 1999), thus indicating large-scale, sophisticated and costly water and sanitation infrastructure. In most cases, these are very expensive even for industrialized societies, and simply unaffordable to societies in developing countries. Furthermore, ideological commitment to costly large-scale systems has often aggravated the problem of services being unavailable to poor communities (Stockholm Water Symposium Statement, 2002, Principle 3, http://www.siwi.org/pdf/2002_Stockholm_Statement.pdf, accessed 18 April 2003).

Our analysis above shows that the NCE approach is limited in its capacity to effectively recover monetary or environmental costs necessary to support sustainable water and sanitation in developing countries.

Ecological economic perspective

EE has emerged as a response to the problematic consequences of economic development (Costanza et al., 1997; Söderbaum, 2000), largely driven by the limited perspective of NCE. EE expands this perspective by making an explicit commitment to sustainability, seeking to locate economic thinking within the biophysical constraints of a finite planet to enable sustainable development (Costanza et al., 1997; Edwards-Jones et al., 2000; Daly and Farley, 2003). It advocates a 'conceptual pluralism' that stresses dialogue and learning between stakeholders holding different values, ideologies and perspectives (Söderbaum 2000). EE therefore does not reject NCE, but calls for constraining its domination in influencing policy when it obstructs sustainable development (Daly and Farley, 2003: 4–5). EE is committed to ethics as decision-making that meets the interests of present generations and future generations of all life on the planet (Costanza et al., 1997; Söderbaum, 2000).

We highlight two of EE's principles with implications for sustainability in water and sanitation here, noting that a broader description of EE is beyond the scope of this paper. First, EE emphasizes sustainable scale for economic activities so they occur within the planet's carrying capacity. Seeking to address problems at the smallest domain in which they can be solved is another of EE's guiding principles (Daly and Farley, 2003) that indicates policy to support a range of technological scales that are as small in physical scale as possible taking into account the context and the objective to limit degradation of the environment.

Second, EE recognizes the constraints on the economy imposed by natural laws, the second law of thermodynamics or entropy law in particular. It states the irreversibility of transformations of matter and energy in everyday processes as a gain in entropy, making low-entropy matter-energy the ultimate or most fundamental means for achieving human ends (Daly and Farley, 2003: 38, 48). Nature supports and maintains the supply of low-entropy matter-energy through cyclic flows in the Earth's natural processes driven by the Sun (such as in the water cycle, nutrient cycle, nitrogen cycle and carbon cycle). Sustainability is improved by frugal use of available supplies of low-entropy matter-energy, and choosing technological processes that keep entropy gain as low as possible (Costanza et al., 1997; Daly and Farley, 2003). EE therefore indicates designing processes where materials flow in cycles with as little mixing, dilution and dispersal as possible, and use as little energy as possible.

EE provides a theoretical rationale for new directions emerging for urban water and sanitation infrastructure. The new paradigm enables assessment of decentralized and distributed options that are tailored to contexts on an equal basis with conventional 'one-size-fits-all' centralized options (Mitchell et al., 2007): options such as stormwater retention for aquifer recharging and rainwater harvesting for water supply, and a host of small-scale sanitation strategies that reduce dilution of wastes in water and recycle nutrients back to the soil, treat wastewater close to where it is produced and facilitate re-use of treated wastewater. Such options provide greater opportunities to conserve low-entropy matter-energy through careful design of technological processes.

EE facilitates cost recovery aligned with sustainability, firstly by stressing the requirement for water and sanitation infrastructure to operate within the carrying capacity of ecosystems – consistent with the 'recovery' of environmental costs. Daly (1992) observes this scientifically uncertain ecological limit must be 'a social decision', decided on through dialogue, consistent with EE's conceptual pluralism, which creates a forum for addressing social costs. Finally, decentralized and distributed arrangements can create multiple output products that potentially create multiple revenue streams that can make recovery of all monetary costs more feasible.

Buddhist economic perspective

We submit that BE provides a further expansion of the economic perspective for water and sanitation, which aligns with and supplements the contribution of EE. BE refers to the collective economic ideas dispersed through the Buddhist scriptures, dealing with the management of material wealth consistent with Buddhist philosophy (Schumacher, 1973; Payutto, 1992, http://www.urbandharma.org/udharma2/becono.html, accessed 28 April 2005; Daniels, 2003).

BE articulates a universal law that nothing is absolute: everything is conditioned, relative and interdependent – which emphasizes relationality between all things, including individuals, society and environment of the present, past and future (Payutto, 1992; Rahula, 1996). BE brings ethics to the centre of economic activity as a result of the karmic law of cause and effect: the ethical quality of intentions and actions underpinning an activity define the nature of their consequences as 'beneficial' or 'harmful' (Payutto, 1992).

For water and sanitation services to contribute to well-being from the BE perspective, they should thus be driven by ethical motivations and seek to cause no harm to individuals, to create no agitation in society, and to have a benign impact on the environment. Below, we outline what we see this to imply in more specific terms.

We propose that BE implies dialogue among stakeholders in deciding on water and sanitation arrangements, concurring with EE and extending its rationale. While ethical motivations are challenging to establish or evaluate, we contend that genuine participatory processes as envisaged by the deliberative democracy discourse can potentially create collective 'right motivation' aligned with BE. Such processes create space where actors traditionally in competition for resources and power can begin to build cooperative relationships, 'united in their ignorance of how best to improve the general situation that brings them together' (Fung and Wright, 2003).

Inclusive dialogue also enables the BE notions of relationality and interdependence to be brought to the fore, between participants in dialogue as well as wider stakeholders including the environment. Systems that foster social cohesion, human dignity and freedom, and environmental care (Schumacher, 1973) align with the need to cause 'no harm'. BE requires that the environment should be treated with reverence (Schumacher, 1973), indicating demands on the environment be kept well below its carrying capacity – consistent with EE's call for sustainable scale.

A Buddhist economy has frequently been interpreted as one that specifies organization at a contextually appropriate scale – neighbourhood scale arrangements and intermediate technologies with local resources supplying local needs, and cooperative, nurturing social environments (Schumacher, 1973; Ariyaratne, 1999; Daniels, 2003). We see this as equivalent to society's collaboratively choosing to live within its economic, environmental and social means.

BE shifts the expectations of the three main groups of actors – government, customers and service providers, who relate to each other and the wider society and environment. It calls service providers to be service-oriented, committed to the well-being of society and the environment they are in relation with – a commitment that may ultimately determine the company's long-term future. It calls on individuals to cooperate with service providers, with a willingness to pay a fair price for the services they receive, and with caring behaviours that support the proper operation of the physical systems that provide water and sanitation services. Finally, it calls on governments not to abdicate responsibility for public welfare, and therefore, to compensate service providers for the societal and ecological benefits delivered.

An expanded perspective by integration

One of NCE's prime concerns is with efficiency in allocating scarce resources to drive economic growth (Daly and Farley, 2003), which we see as a key limitation in its perspective for indicating sustainable water and sanitation systems. EE and BE, like NCE, are concerned with efficiency – using the least means to reach desired ends (Schumacher, 1973) – but they are equally concerned with effectiveness, that is, not only concerned with 'doing the thing right', but with 'doing the right thing'. EE asks the effectiveness question taking a number of perspectives into account, leading it to be concerned with the physical limits of the planet, distributional effects and justice issues. BE asks the effectiveness question in light of how relationality and ethics are incorporated to achieve beneficial ends.

Thus, we argue that EE and BE are able to expand the dominant but limited perspective of NCE which neglects key characteristics of the world and human capacity for sustainability. They are collectively able to indicate a set of guidelines for water and sanitation that is aligned with sustainability while limiting NCE to its domain of applicability. We propose four interconnected principles based on such an integrated perspective:

• Arrangements for water and sanitation should emphasize cooperation between stakeholders. Planning through cooperative and deliberative processes that bring the diverse knowledges and interests of stakeholders such as planners, professional experts, service providers, service recipients, government agents and the public together is likely to lead to decisions that are fair and survive time (Costanza et al., 1997). Such processes provide a forum to address social impacts, and to highlight relationality and simultaneously seek well-being of individuals, society and the environment.
• Ethics and 'goodness' should underpin decision processes and choices. The goal of water and sanitation services would then be to enhance the quality of life of individuals in the community without causing harm to others, avoiding excessive costs rather than imposing them on future generations.
• Efficiency goals should include entropy considerations for the resources used, including water, nutrients and energy. Then efforts would be made to design material flows in closed loops using as little energy and few non-recycling materials as possible. It would for example explore local water supplies, returning excreted nutrients to agriculture in a sanitized and useable form, decreasing or even eliminating the use of water in sanitation, and treating any water that is used so its quality and quantity cause no ecosystem degradation, using technologies that have low requirements for energy and other resources.
• Society should manage water and sanitation to support living within its economic and environmental means. They would lie within the economic means of the community, of appropriate financial scale so costs are recoverable. Physical systems would be designed to lie within the carrying capacity of local and global ecosystems. Efficiency would be sought, that increases individual, societal and environmental well-being with fewer input resources and their re-use multiple times.

Conclusion

While NCE has delivered significant benefits in many areas, its approaches have increased ecosystem degradation, poverty and injustice by not paying adequate attention to ecological limits and social constraints (Smith et al., 1999). NCE attempts to address these problems have led to little success due to its narrow focus on economic growth.

We have argued that drawing on EE and BE can lead to an expanded economic perspective for guiding urban water and sanitation services for developing countries. EE emphasizes ecological limits and social justice through democracy, that indicate decision-making through public participation, and technological processes that limit entropy gain and keep environmental impacts within the carrying capacity of ecosystems. BE stresses relationality between all individuals, wider society and the environment, that indicates cooperation based on ethics and caring for all.

Finally, we have proposed a set of guiding principles based on an integrated economic perspective, to indicate the type of services and decision-making processes suitable for developing countries, which align with sustainability by consciously remaining within the economic and environmental means of the society they serve.

References

1. Ariyaratne, Ahangamage Tudor (1999) Schumacher Lectures on Buddhist Economics, Sarvodaya Vishva Lekha, Ratmalana, Sri Lanka.
2. Costanza, Robert, John H. Cumberland, Herman E. Daly, Robert Goodland and Richard B. Norgaard (1997) An Introduction to Ecological Economics, Boca Raton, FL: St. Lucie Press.
3. Daily, Gretchen C. and Paul R. Ehrlich (1996) 'Socioeconomic Equity, Sustainability, and Earth's Carrying Capacity', Ecological Applications 6(4): 991–1001. | Article |
4. Daly, Herman E. (1992) 'Allocation, Distribution, and Scale: Towards an economics that is efficient, just, and sustainable', Ecological Economics 6(3): 185–193. | Article |
5. Daly, Herman E. and Joshua C. Farley (2003) Ecological Economics: Principles and applications, Washington, DC: Island Press.
6. Daniels, Peter L. (2003) 'Buddhist Economics and the Environment: Material flow analysis and the moderation of society's metabolism', International Journal of Social Economics 30(1/2): 8–33. | Article |
7. Edwards-Jones, Gareth, Ben Davies and Salman S. Hussain (2000) Ecological Economics: An introduction, Malden, MA: Blackwell Science.
8. Fung, Archon and Erik Olin Wright (2003) 'Thinking About Empowered Participatory Governance', in Archon Fung and Erik Olin Wright (eds.) Deepening Democracy: Institutional innovations in empowered participatory governance, London: Verso.
9. Gleick, Peter H., Gary Wolff, Elizabeth L. Chalecki and Rachel Reyes (2002) 'The Privatization of Water and Water Systems', in Peter H. Gleick (ed.) The World's Water 2002–2003: The biennial report on freshwater resources, Oakland, CA: Pacific Institute for Studies in Development, Environment, and Security.
10. McGranahan, Gordon, Pedro Jacobi, Jacob Songsore, Charles Surjadi and Marianne Kjellén (2001) The Citizens at Risk: From Urban sanitation to sustainable cities, London and Sterling, VA: Earthscan.
11. McNeill, Desmond (1998) 'Water as an economic good', Natural Resources Forum 22(4): 253–261.
12. Mitchell, Cynthia, Simon Fane, Juliet Willetts, Roel Plant and Alex Kazaglis (2007) 'Costing for Sustainable Outcomes in Urban Water Systems: A guidebook', CRC for water quality and treatment research report no. 35, ISBN 1876616601.
13. Payutto, Phra Thepwethi (1992) 'Buddhist Economics: A middle way for the market place', Available online.
14. Rahula, Walpola (1996) What the Buddha Taught, Dehiwala, Sri Lanka: Buddhist Cultural Centre.
15. Schumacher, Ernst Friedrich (1973) Small is Beautiful: Economics as if people mattered, New York: Harper Torchbooks.
16. Schwartz, Nelson D. (2005) 'Prosperity Without Peace: Israel rises', Fortune 151(10): 46–51. | PubMed |
17. Smith, Joseph Wayne, Graham Lyons and Gary Sauer-Thompson (1999) The Bankruptcy of Economics: Ecology, economics and the sustainability of the Earth, London and Basingstoke: Macmillan Press.
18. Söderbaum, Peter (2000) Ecological Economics: A political economics approach to environment and development, London: Earthscan.
19. Söderbaum, Peter (2003) 'Ecological Economics for Water Policy and Management: A need for major shifts in thinking', Water Science & Technology 47(6): 33–41.
20. Stockholm Water Symposium Statement (2002) 'Urgent Action Needed for Water Security: 2002 STOCKHOLM STATEMENT', Available online.
21. United Nations (1997) Glossary of Environment Statistics. Studies in methods: Series F, No. 67, New York: United Nations.
22. Walker, Ian (2003) 'PRC Wastewater Tariffs and Management Study', Available online.