Macroeconomics and the Environment

Macroeconomics and the Environment

Essays on Green Accounting

Advances in Ecological Economics series

Salah El Serafy

Though scientists and environmentalists have long expressed concern over the rapid deterioration of the global environment, economists have largely failed to recognize the issue’s relevance to their field. Salah El Serafy argues for an increased focus on the economic aspects of environmental degradation, calling for a fundamental shift in how economists measure and discuss national income.

Chapter 14: Growth rate after adjustment

Salah El Serafy

Subjects: economics and finance, environmental economics, international accounting, environment, ecological economics, environmental economics


It is often presumed that greening the accounts of an economy will reveal that its growth had been overstated. This short chapter seeks to show that contrary to popular opinion, the rate of growth of an economy consequent upon greening its national accounts need not at all be lower than the growth rate that had been inferred from the unadjusted estimates. The re-estimated growth rate can be higher, lower, or the same as that reckoned before greening. This argument pertains specifically to average annual growth estimated over a period of years as was done under the WRI’s study of Indonesia (see Chapter 19 below). This argument, however, does not necessarily apply to any one-year’s growth to be derived from two successive national income estimates. If greening the accounts results in downsizing GDP (or as in the WRI study adjusting NDP) for period t+1 as compared with period t, then other things being equal, the growth rate will be found clearly to have fallen. This will be true unless national income for period t had itself been reduced – a fact that will obscure the change.

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