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 10: The Relationship Between Welfare Measures and Indicators of Sustainable Development

Geir B. Asheim

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


Geir B. Asheim 1 INTRODUCTION What is the relationship between welfare measures and indicators of sustainable development? This chapter studies the extent to which measures of welfare improvement can also be used as indicators of sustainability. It builds on (and borrows freely from) published papers by myself and co-authors (Asheim, 1994, 2003, 2004, 2007a; Asheim, Buchholz and Withagen, 2003; and Asheim and Weitzman, 2001); most of these papers are included in Asheim (2007b). The relationship between welfare measures and indicators of sustainable development is particularly interesting in a setting where there is population growth, and thus, in large part of this chapter I will allow for positive population growth. What constitutes welfare improvement when population is changing? The answer depends on whether a bigger future population for a given flow of per capita consumption leads to higher welfare weights for people living at that time, or alternatively, only per capita consumption matters. When applying, for example, discounted utilitarianism to a situation where population changes exogenously through time, it seems reasonable to represent the instantaneous well-being of each generation by the product of population size and the utility derived from per capita consumption. This is the position of ‘total utilitarianism’, which has been endorsed by, for example, Meade (1995) and Mirrlees (1967), and which is the basic assumption in Arrow, Dasgupta and Mäler’s (2003b) study of savings criteria with a changing population. Within a utilitarian framework, the alternative position of ‘average utilitarianism’, where the instantaneous well-being of each generation depends...

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