Handbook of Environmental Accounting

Handbook of Environmental Accounting

Elgar original reference

Edited by Thomas Aronsson and Karl-Gustaf Löfgren

This concise Handbook examines welfare measurement problems in a dynamic economy, focusing on the welfare-economic foundations for social accounting.

Chapter 9: Sustainable Consumption Programs

John M. Hartwick

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


John M. Hartwick 1 INTRODUCTION We explore the sustainability of an abstract aggregated economy given an apparent threat to its persistence. ‘Maintaining capital intact’ was a central idea in debates in the 1930s among leading English economists and was in fact formalized in the notion of net national product, a flow of product that could be reproduced next period because the ‘erosion’ of capital had been addressed with ‘replacement’ investment. Thus sustainability is about maintaining a flow of a valuable product when its persistence is threatened by ‘capital being depleted’. Attention shifted away from the formalities of ‘maintaining capital intact’ once the central concepts of national accounts were agreed upon, but in 1974, Solow confronted the notion of maintaining intact a stream of actual net product, namely aggregate consumption, when part of the capital base of the economy was being unavoidably depleted, as in using some oil each period for production, a current flow from a finite stock of oil. The bottom line turned out to be: maintain the combined bits of capital in the economy intact as a unit, in a particular sense, and then one can maintain the net product flow (aggregate consumption) non-declining (Hartwick 1977). Solow (1974) becomes the seminal piece in the modern economics literature on the sustainability of net products in an economy. The issue that the Solow-Hartwick contributions ‘solved’ was achieving sustainability when one of the capital goods necessary for current production was unavoidably shrinking or being depleted. It is this literature and its...

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