Inclusive Income Accounts: Practical Measures to Go Beyond GDP

It is well known that Gross Domestic Product (GDP) is an incomplete measure of economic welfare. In particular, it excludes the value associated with natural and human capital. However, capital is hard to measure and existing estimates vary widely, even for developed nations. Therefore, this paper develops two new measures, gross and net inclusive income as analogs to GDP and net national disposable income (NNDI), using internally consistent national accounts methods and existing data to extend the scope of welfare measurement through the incorporation of these capitals. Using exchange values, GII and NII do not incorporate externalities but do clarify trade‐offs between the economic, environmental, and social domains. This paper also presents and comments on experimental results and potential extensions. After adjusting for these capitals, and the resultant flows which emerge from them, such as atmospheric degradation, growth in the UK's NII between 2008 and 2019 is faster than GDP growth, as traditional measures exclude efforts to reduce carbon emissions, suggesting that traditional productivity measures which exclude reductions in carbon emissions may underestimate the extent of innovation in the UK.