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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 8: Adjusting for disinvestment: in the wake of Brundtland

Essays on Green Accounting

Salah El Serafy


This chapter originates in a paper that appeared in 1992 under the heading: ‘Sustainability, income measurement and growth’ in a book published by Island Press and edited by Goodland, Daly and El Serafy. The book was titled, Population, Technology and Lifestyle, and subtitled The Transition to Sustainability. As our introduction to that book explained we used the Brundtland Report as a springboard for further explorations of the concept and estimation of ‘sustainable development’. For the present chapter the original text had to be trimmed, though its main argument is retained. My purpose was to show that investment, which is seen by most economists as a main instrument for future output, should be scaled down in the national accounts to reflect natural resource deterioration. Such a correction will not be exhaustive since a great deal of natural resource losses occurs outside the market place and escapes national accounting altogether. Nevertheless the argument is important, not only to take care of the activities that are already entered inadequately in GDP, but also others that are candidates for future inclusion. The activities affected would include commercial fishing, mining and logging. It should be noted that the original paper had been published before SNA93 came out and contains prior expectations of the SNA that have not all materialized.

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