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Economic Growth and Valuation of the Environment

A Debate

Edited by Ekko C. Van Ierland, Jan van der Straaten and Herman Vollebergh

The debate on the valuation of nature and the environment, sustainable national income and economic growth is one of prime importance in environmental economics. Economic Growth and Valuation of the Environment deals with the fundamental approaches to calculating sustainable national income and their implications for the valuation of the environment.
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Chapter 1: Valuation of Nature and the Environment

Ekko C. van Ierland, Jan van der Straaten and Herman R.J. Vollebergh


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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