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The Economics of Nature and the Nature of Economics

Edited by Cutler J. Cleveland, David I. Stern and Robert Costanza

This book discusses important recent developments in the theory, concepts and empirical applications of ecological economics and sustainable development. The editors have assembled a fascinating collection of papers from some of the leading scholars in the field of ecological economics.
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Chapter 11: Green national accounting: goals and methods

Monica Grasso


Robert Costanza, Steve Farber, Beatriz Castaneda and Monica Grasso ECONOMIC INCOME, ECONOMIC WELFARE AND HUMAN WELFARE The requirements for an aggregate accounting system depend upon the goals and objectives it is intended to serve. These goals and objectives include measuring (1) the level and pattern of economic activity; (2) sustainable economic income: the amount that can be consumed without depleting capital stocks (Hicks, 1946); (3) economic welfare: the net economic component of total welfare (Daly and Cobb, 1989); and (4) human welfare: the degree to which human needs are fulfilled (Max-Neef, 1992). This range of goals is arrayed in Figure 11.1 and Table 11.1. Economic income is a measure of the production and use of goods and services. There are variations (between columns 1–3 in Table 11.1) which have to do with the way environmental services, natural capital and other non-marketed items are dealt with. Figure 11.1 makes clear that economic income ultimately is generated from the stocks of both human-made and natural capital (the ‘wealth’ accounts) and that this income includes both marketed and non-marketed items. But conventional measures of marketed economic income and expenditure (GNP) do not adequately pick this up. Measures of sustainable economic income attempt to incorporate non-marketed natural capital changes. If it is assumed that natural and human-made capital are substitutable, the goal is to measure weakly sustainable income (Table 11.1, column 2). If it is assumed that natural and human-made capital are not substitutable in all cases, the goal is to measure strongly...

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