Table of Contents

Handbook of Sustainable Development

Handbook of Sustainable Development

Second Edition

Edited by Giles Atkinson, Simon Dietz, Eric Neumayer and Matthew Agarwala

This timely and important Handbook takes stock of progress made in our understanding of what sustainable development actually is and how it can be measured and achieved.

Chapter 22: Genuine saving as an indicator of sustainability

Kirk Hamilton and Esther Naikal

Subjects: economics and finance, environmental economics, environment, environmental economics, environmental geography, valuation


Choosing sustainable development is an ethical position adopted by society, reflecting a desire to ensure that future generations enjoy at least as much welfare as the current generation. Because sustainability is inherently about the future, measuring it has been a challenge. Without indicators, promises to achieve sustainability risk being largely empty. A common thread in the literature on sustainable development concerns the treatment of the environment and natural resources within the System of National Accounts (SNA). This is important because the SNA has an incomplete treatment of resource issues. To give one example, commercial natural resource stocks are supposed to be measured in the national balance sheet accounts of the SNA, but there is no corresponding adjustment to net national income or net saving to reflect the consumption of capital that occurs when these stocks are exploited. Similarly, there is no explicit accounting in the SNA for the damages to economic assets that result from pollution emissions. The consequence is that SNA measures of income and saving are overstated, substantially so for the most resource-dependent economies. In many countries, finance ministries are simply working with the wrong figures. If depletion of the environment is ignored in the most common and powerful set of indicators used to guide economic development, then the threat to sustainability is obvious.

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