Essays on Green Accounting
Advances in Ecological Economics series
Chapter 4: Income, capital and wealth
Income is a difficult quantity to define and problematic to measure. Capital is even worse; and yet both are important concepts with which economists and accountants have to struggle. Their relevance to national accounting is obvious for they directly impinge on the estimations of the macroeconomic values that are read from national income. Controversy surrounds discussion of both quantities, and yet, the meaning of both concepts has been fairly clear for some considerable time. This is not to say that either of them, especially capital, is yet free from debate. Disputes have also surrounded a capital-related quantity, ‘wealth’, which has received much attention in environmental economic discussions of late. A source of some confusion is that wealth in classical economics often meant a flow of income. The recent popularity of the stock of wealth derives from the claim that it is superior to income as an indicator of welfare – a claim that can hardly be disputed. But welfare is not the primary reason, or even the reason, why national income is estimated.
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