Wealth, Welfare and Sustainability

Wealth, Welfare and Sustainability

Advances in Measuring Sustainable Development

Kirk Hamilton and Giles Atkinson

This important book presents fresh thinking and new results on the measurement of sustainable development. Economic theory suggests that there should be a link between future wellbeing and current wealth. This book explores this linkage under a variety of headings: population growth, technological change, deforestation and natural resource trade. While the relevant theory is presented briefly, the chief emphasis is on empirical measurement of the change in real wealth: this measure of net or ‘genuine’ saving is a key indicator of sustainable development. The methodological and empirical work is bolstered by tests of the predictive power of genuine saving in explaining future consumption and economic growth. Just as importantly, the authors show that many resource-abundant countries would be considerably wealthier today had they managed to save and invest the profits from natural resource exploitation in the past.

Chapter 7: Deforestation: Accounting for a Multiple-Use Resource

Kirk Hamilton and Giles Atkinson

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


INTRODUCTION The primary goal of this chapter is to extend the savings analysis to a domain that seems both particularly topical and important, the depletion of forests in the developing world. Green national accounting can inform this debate in a number of ways. Firstly, there is the provision of a consistent and coherent framework for analysing detailed and diverse data describing the net welfare cost of clearing forested land. Secondly, given the focus of these accounts on the better measurement of income and wealth, they are ideally suited to evaluating whether the switch of land use from forest to agriculture is actually wealth increasing (or ‘sustainable’). Central to this is an expansion of the asset boundary to account explicitly for changes in land use, that is, where land is an asset that has a distinct (social) value depending on the use to which it is put (Hartwick, 1992, 1993; Vincent, 1999a). A number of empirical studies have examined forestry and the national accounts (see, Vincent and Hartwick, 1997, for a comprehensive survey). Many of these studies, however, have focused exclusively on accounting for the net accumulation of timber that arises when forested land is cleared. The basic model underlying these calculations views the exploitation of primary forest as akin to a ‘timber mine’ where ‘reserves’ can be augmented via natural growth (Nordhaus and Kokkelenberg, 1999). Net accumulation is defined as net harvest (or net growth) valued at the unit rent or stumpage value for a given timber resource (see,...

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