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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 12: Depletable resources: fixed capital or inventories?

Essays on Green Accounting

Salah El Serafy


In this chapter I argue the case against treating the declines in natural resource stocks similarly to fixed capital consumption. I advanced a similar argument some 20 years ago in an invited paper I presented at a 1991 conference organized by the International Association of Research in Income and Wealth (IARIW). The original paper (El Serafy, 1993) was later printed in Franz and Stahmer (eds), Approaches to Environmental Accounting. The conference at which I first presented this argument was held in Baden, near Vienna, Austria as part of the preparations for SNA93. In some small way my contribution was used for the drafting of that document, and in substance it was used also in the 1993 United Nations Statistics Division’s Manual on ‘Integrated Environmental and Economic Accounts’ (SEEA). The SEEA was intended to guide the implementation of the new SNA, which for the first time, as related earlier, tried to cover environmental issues. When it first came out the manual carried the label ‘Interim Version’ in expectation that it would be put on a firmer footing later. However, despite a number of attempts since its first appearance, a definitive version has been difficult to produce. This failure, as I have already tried to explain, was inevitable owing to the fact that SNA93 had declared the environment as a non-economic concern. Subsequent versions of the SNA meant for ‘reintegration’ have not been able to close this breach.

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