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Value and income

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  • Cairns, Robert D.

Abstract

This paper argues that income is a flow of value to society; therefore, an economic modeler's choice of a concept of value imposes a concept of income. The argument is used to distinguish three concepts of national income. (1) In a discounted-utilitarian model, which is usually the basis for theoretic discussions of net national income, the formulation of value imposes a concept of income that is not observable and hence does not provide income statistics. (2) In a perfectly competitive economy, national income is, in principle, observable. Study of the competitive model provides a theoretic foundation for national accounting, with extensions to distorted economies. However, two unobservable components of ideal income, consumers' surplus and capital gains, are perforce neglected. (3) A maximin program is the mathematical representation of another value, sustaining an economy. It employs a method of intertemporal valuation that does not involve discounting. Income is sustained value. Since a maximin program is not expressed for a distorted economy, there is no observable indicator of whether an economy is being sustained.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 66 (2008)
Issue (Month): 2-3 (June)
Pages: 417-424

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Handle: RePEc:eee:ecolec:v:66:y:2008:i:2-3:p:417-424

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Web page: http://www.elsevier.com/locate/ecolecon

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References

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  1. John C. V. Pezzey, 2004. "Sustainability Policy and Environmental Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 339-359, 06.
  2. Cairns, Robert D. & Long, Ngo Van, 2006. "Maximin: a direct approach to sustainability," Environment and Development Economics, Cambridge University Press, vol. 11(03), pages 275-300, June.
  3. Robert D. Cairns, 2002. "Green national income and expenditure," Canadian Journal of Economics, Canadian Economics Association, vol. 35(1), pages 1-15, February.
  4. Vincent Martinet & Gilles Rotillon, 2007. "Invariance in growth theory and sustainable development," Working Papers 23893, Institut National de la Recherche Agronomique, France.
  5. Y. Hossein Farzin, 2006. "Conditions for Sustainable Optimal Economic Development," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 518-534, 08.
  6. Geir B. Asheim & Wolfgang Buchholz, 2002. "A General Approach to Welfare Measurement through National Income Accounting," CESifo Working Paper Series 831, CESifo Group Munich.
  7. Dixit, Avinash & Hammond, Peter & Hoel, Michael, 1980. "On Hartwick's Rule for Regular Maximin Paths of Capital Accumulation and Resource Depletion," Review of Economic Studies, Wiley Blackwell, vol. 47(3), pages 551-56, April.
  8. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
  9. Solow, Robert, 1993. "An almost practical step toward sustainability," Resources Policy, Elsevier, vol. 19(3), pages 162-172, September.
  10. J. A. Sefton & M. R. Weale, 2006. "The Concept of Income in a General Equilibrium," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 219-249.
  11. Cairns, Robert D., 2000. "Sustainability accounting and green accounting," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 49-54, February.
  12. M. L. Weitzman, 1974. "On the Welfare Significance of National Product in Dynamic Economy," Working papers 125, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Robert Cairns, 2003. "Reconciling the Green Accounts," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 25(1), pages 51-63, May.
  14. Cairns, Robert D., 2002. "Green accounting using imperfect, current prices," Environment and Development Economics, Cambridge University Press, vol. 7(02), pages 207-214, May.
  15. Dasgupta, Partha & M Ler, Karl-G Ran, 2000. "Net national product, wealth, and social well-being," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 69-93, February.
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Cited by:
  1. Vincent Martinet & Luc Doyen, 2010. "Maximin, Viability and Sustainability," EconomiX Working Papers 2010-19, University of Paris West - Nanterre la Défense, EconomiX.
  2. Bazhanov, Andrei, 2013. "Inefficiency and Sustainability," MPRA Paper 51815, University Library of Munich, Germany.

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