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Macroeconomics and the Environment

Essays on Green Accounting

Salah El Serafy

Though scientists and environmentalists have long expressed concern over the rapid deterioration of the global environment, economists have largely failed to recognize the issue’s relevance to their field. Salah El Serafy argues for an increased focus on the economic aspects of environmental degradation, calling for a fundamental shift in how economists measure and discuss national income.
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Chapter 6: Hicks’s income and Hicksian income

Essays on Green Accounting

Salah El Serafy


It should be clear from the discussion in the previous two chapters that maintaining capital intact is a necessary requirement for estimating income. If capital, whether produced or natural, is deteriorating, then what passes as income in the national accounts will be overestimated. National accounting conventions had restricted the maintenance of capital to produced assets, but the new ecological economics movement has sought to extend the concept of capital to embrace natural resources. However, this has encountered some resistance from ‘purist’ environmentalists who expected no good to come from any association with economists, and resisted using concepts such as capital for ecological matters. And yet, once the economic avenue of national accounting has been taken, the economic link strongly asserts itself since the apparatus of national accounting, as said before, is inescapably economic. Before I go any further, the distinction needs to be made between what I intend to say in this chapter distinguishing what I have called ‘Hicks’s income’ from ‘Hicksian income’ which has become familiar to environmental economists. The former is what can be culled from Hicks’s writings on the concept and estimation of income and the latter is the view that proper estimation of income should include keeping ‘environmental capital’ intact – pace the dissention of some environmentalists.

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