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Frontier Issues in Ecological Economics

Frontier Issues in Ecological Economics

Philip Lawn

Ecological economics formally emerged in the late 1980s in response to the failure of mainstream economic paradigms to deal adequately with the interdependence of social, economic and ecological systems. Frontier Issues in Ecological Economics focuses on a range of cutting-edge issues in the field of ecological economics and outlines plausible measures to achieve a more sustainable, just, and efficient world for all.

Chapter 8: Using a Fisherian Measure of Income to Guide a Nation’s Transition to a Steady-State Economy

Philip Lawn

Subjects: development studies, development economics, economics and finance, development economics, environment, ecological economics

Extract

INTRODUCTION In a relatively recent News and Review article in the journal, Ecological Economics, William Mates (2004) outlined two basic accounting identities for Hicksian and Fisherian national income. The identities were devised following a paper I wrote highlighting the theoretical foundation underlying the Index of Sustainable Economic Welfare (ISEW) and the Genuine Progress Indicator (GPI). In a response to Mates’ paper (Lawn, 2004b), I extended Mates’ accounting identities to include the cost of lost natural capital services. I also introduced a means by which the physical scale of a nation’s macroeconomy could be measured and tracked. This, I argued, would enable one to calculate the economic welfare associated with a nation’s prevailing growth strategy and aid its inevitable transition to a steady-state economy. In this chapter, I go one step further and measure the Hicksian and Fisherian national income of Australia for the period 1967–97. In view of the superiority of the latter indicator, I also contrast Australia’s per capita Fisherian income with the growth trend of the Australian economy to reveal whether Australia should have already initiated a transition to a steady-state economy and, if so, when the transition might best have begun. Before revealing the results of the study, I will briefly say something about the steady-state economy and reiterate the difference between Hicksian and Fisherian national income. Second, I will introduce the basic equations for Hicksian and Fisherian national income revealed in my response to Mates’ paper (Lawn, 2004b). Third, since both equations are...

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