Edited by Ekko C. Van Ierland, Jan van der Straaten and Herman Vollebergh
Chapter 1: Valuation of Nature and the Environment
Ekko C. van Ierland, Jan van der Straaten and Herman R.J. Vollebergh INTRODUCTION The debate on valuation of nature and the environment, green national accounting and economic growth is a classic and important topic in environmental economics.1 Discussion on the deﬁnition and meaning of national income began at the beginning of the twentieth century with the work of King (1919) and Pigou’s famous The Economics of Welfare (Pigou, 1920). As is well known, Pigou was well aware of the pitfalls of equating income with welfare. King also argues that the two are diﬀerent, because in a modern society higher income would always be accompanied by economic losses due to an increase in scarcity of elements of nature, relevant for human society. Furthermore, he claims that ‘modern’ production was only possible by using depletable resources such as coal and iron. It took until after World War II before King’s argument regained momentum in the debate on how to set up a system of national accounts. Fabricant (1947) argued again that the depletion of natural resources should be taken into account as a cost component in the system. Economists like Denison (1947), however, argued that this was unnecessary because nature and the environment would be inﬁnite resources which could be used without restriction. The way in which the national accounts were set up clearly reﬂects the latter, by then the most commonly held view on the relation between growth and the environment. Although after 25 years this issue...
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