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Measuring Income and Measuring Sustainability

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  • Pemberton, Malcolm
  • Ulph, David

Abstract

We examine what interpretation can be given to inclusive income, understood to be consumption plus the value of the net increase in all relevant capital stocks. We introduce the concept of instantaneously constant value income, defined as the maximum amount the economy can consume at a moment of time and keep the expected present value of utility of current and future generations constant. We argue that this income concept captures some of the concerns underlying sustainability. Our main result is that inclusive income equals instantaneously constant value income. We show that this result holds in a very general setting and, in particular, carries over to models incorporating technological progress when such progress can be captured by augmented stocks of knowledge. An important implication of our main result is that it provides a very simple method for deriving inclusive income, which does not involve any linearization of the Hamiltonian. Copyright 2001 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Pemberton, Malcolm & Ulph, David, 2001. " Measuring Income and Measuring Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 25-40, March.
  • Handle: RePEc:bla:scandj:v:103:y:2001:i:1:p:25-40
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    Cited by:

    1. Alessio Emanuele BIONDO, 2010. "A Growth Rate for a Sustainable Economy," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(2(12)/Sum), pages 7-20.
    2. John Pezzey & Nick Hanley & Karen Turner & Dugald Tinch, 2003. "Augmented Sustainability Measures for Scotland," Working Papers 2003_11, Business School - Economics, University of Glasgow.
    3. Geir B. Asheim & Wolfgang Buchholz, 2004. "A General Approach to Welfare Measurement through National Income Accounting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 361-384, June.
    4. William Brock & Anastasios Xepapadeas, 2004. "Ecosystem Management in Models of Antagonistic Species Coevolution," Working Papers 0503, University of Crete, Department of Economics.
    5. Nick Hanley & Les Oxley & David Greasley & Eoin McLaughlin & Matthias Blum, 2016. "Empirical Testing of Genuine Savings as an Indicator of Weak Sustainability: A Three-Country Analysis of Long-Run Trends," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(2), pages 313-338, February.
    6. Louis Dupuy & Matthew Agarwala, 2014. "International trade and sustainable development," Chapters,in: Handbook of Sustainable Development, chapter 25, pages 399-417 Edward Elgar Publishing.
    7. Dimitra Vouvaki & Anastasios Xepapadeas, 2005. "Criteria for Assessing Sustainable Development: Theoretical Issues and Empirical Evidence for the Case of Greece," Working Papers 0511, University of Crete, Department of Economics.
    8. Nick Hanley & Louis Dupuy & Eoin McLaughlin, 2015. "Genuine Savings And Sustainability," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 779-806, September.
    9. John Hartwick & Ngo Van Long & Huilan Tian, 2003. "On the Peaking of Consumption with Exhaustible Resources and Zero Net Investment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 24(3), pages 235-244, March.
    10. Vouvaki, Dimitra & Xepapadeas, Anastasios, 2008. "Changes in social welfare and sustainability: Theoretical issues and empirical evidence," Ecological Economics, Elsevier, vol. 67(3), pages 473-484, October.
    11. Huhtala, Anni & Toppinen, Anne & Boman, Mattias, 2003. "When the theory is not enough - valuation of forest resources with "efficiency" prices in practice," Journal of Forest Economics, Elsevier, vol. 9(3), pages 205-222.
    12. Matthias Blum & Cristián Ducoing & Eoin McLaughlin, 2016. "Genuine Savings in developing and developed countries, 1900-2000," Discussion Papers in Environment and Development Economics 2016-15, University of St. Andrews, School of Geography and Sustainable Development.
    13. Mubashir Qasim & Les Oxley & Eoin McLaughlin, 2018. "Genuine Savings as a Test of New Zealand Weak Sustainability," Discussion Papers in Environment and Development Economics 2018-01, University of St. Andrews, School of Geography and Sustainable Development.
    14. John C. V. Pezzey, 2004. "Sustainability Policy and Environmental Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 339-359, June.
    15. Geir Asheim & Taoyuan Wei, 2009. "Sectoral Income," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 42(1), pages 65-87, January.
    16. John C. V. Pezzey, 2002. "A One-sided Sustainability Test With Multiple Consumption Goods," Working Papers in Ecological Economics 0201, Australian National University, Centre for Resource and Environmental Studies, Ecological Economics Program.
    17. Atkinson, Giles & Gundimeda, Haripriya, 2006. "Accounting for India's forest wealth," Ecological Economics, Elsevier, vol. 59(4), pages 462-476, October.
    18. Anastasios Xepapadeas, 2014. "Environmental Sustainability and Economic Development: Cost Benefit Analysis for Sustainable Development," DEOS Working Papers 1413, Athens University of Economics and Business.
    19. Mino, Kazuo, 2004. "On the Generalized Weitzman's Rule," MPRA Paper 16996, University Library of Munich, Germany.
    20. Asheim, Geir B. & Hartwick, John M., 2011. "Anomalies in green national accounting," Ecological Economics, Elsevier, vol. 70(12), pages 2303-2307.
    21. Mino, Kazuo, 2004. "Weitzman's rule with market distortions," Japan and the World Economy, Elsevier, vol. 16(3), pages 307-329, August.
    22. Pezzey, J.C.V.John C. V., 2004. "One-sided sustainability tests with amenities, and changes in technology, trade and population," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 613-631, July.
    23. John C. V. Pezzey, 2002. "One-sided Unsustainability Tests and NNP Measurement with Multiple Consumption Goods," Economics and Environment Network Working Papers 0208, Australian National University, Economics and Environment Network.
    24. Greasley, David & Hanley, Nicholas & Kunnas, Jan & McLaughlin, Eoin & Oxley, Les & Warde, Paul, 2013. "Comprehensive investment and future well-being in the USA, 1869-2000," Stirling Economics Discussion Papers 2013-06, University of Stirling, Division of Economics.
    25. Pezzey, John C.V. & Hanley, Nick & Turner, Karen & Tinch, Dugald, 2006. "Comparing augmented sustainability measures for Scotland: Is there a mismatch?," Ecological Economics, Elsevier, vol. 57(1), pages 60-74, April.

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