An Introduction to Demand Management, Long-Run Growth and Global Economic Governance
Chapter 2: Planet Accounts
One difficulty with eartheconomics is that you cannot observe eartheconomic variables directly. In a shop you can see the products in that shop and observe the amounts sold, the inventories and the prices of each item. In a factory you can count the products and observe the employees. At home you know the income of your household and your spending and saving. But you cannot see consumption, production, saving or the price level of Earth. Still, both understanding macroeconomics and policy making requires numbers. We need to know how many products are produced and bought and at what prices. Is consumption of all people going up or down? Has the purchasing power of money changed? How much are we saving? And what about Earth’s investment in human and physical capital? 2.1 WHY ACCOUNTING? The most important method to collect and present economic data at the macroeconomic level of an individual country are the National Accounts and for eartheconomics the equivalent is the Planet Accounts that we will study in this chapter. Eartheconomics would be blind without these accounts. The accounts are needed for: • analysis (understanding the relations between variables, quantification and testing of the strength of these relationships and estimating the parameters of econometric models), • policy (understanding and predicting the impact of policy instruments often with the use of simulation models) and • assessment or performance measurement (ex post evaluation of policies or – equally relevant – the absence of policies).
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