Edited by Cutler J. Cleveland, David I. Stern and Robert Costanza
Chapter 9: Alternatives to gross domestic product: a critical survey
Richard W. England INTRODUCTION Efforts to measure a nation’s aggregate income date back to the seventeenth century, when Sir William Petty devised one of the first national income estimates. After Petty’s time, the national income concept evolved slowly as economists developed their understanding of the way economic systems operate and as the key economic issues faced by society changed. It is widely recognized, however, that the economic crisis of the Great Depression, the political and military conflict of the Second World War and the emergence of Keynesian macroeconomic theory prompted the creation of modern national income accounting (Carson, 1975; Ruggles, 1993). As Robert Eisner (1989) correctly observed, ‘The national income and product accounts ... have been among the major contributions to economic knowledge over the past half century.’ Since 1945, national income statistics have found a variety of practical uses. For instance, they help to inform the design of government fiscal and monetary policies, influence corporate investment plans and are commonly used to assess economic development strategies in less developed nations. From their inception, however, the national income and product accounts have also been used to make international comparisons of wellbeing and to track changes in a country’s level of welfare. Simon Kuznets, one of the architects of national accounts, certainly intended this use: ‘National income may be defined as the net value of all economic goods produced by the nation ... Any claim to significance such a total would have would lie in its presumptive usefulness as an appraisal of the...
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