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Sustainability and the measurement of wealth

  • Arrow, Kenneth J.
  • Dasgupta, Partha
  • Goulder, Lawrence H.
  • Mumford, Kevin J.
  • Oleson, Kirsten

We develop and apply a consistent and comprehensive theoretical framework for assessing whether economic growth is compatible with sustaining wellbeing over time. Our approach differs from earlier approaches by concentrating on wealth rather than income. Sustainability is demonstrated by showing that a properly defined comprehensive measure of wealth is maintained through time. Our wealth measure is unusually comprehensive, capturing not only reproducible and human capital but also natural capital, health improvements and technological change. We apply the framework to five countries: the United States, China, Brazil, India and Venezuela. We show that the often-neglected contributors to wealth – technological change, natural capital and health capital – fundamentally affect the conclusions one draws about whether given nations are achieving sustainability. Indeed, even countries that display sustainability differ considerably in the kinds of capital that contribute to it.

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Article provided by Cambridge University Press in its journal Environment and Development Economics.

Volume (Year): 17 (2012)
Issue (Month): 03 (June)
Pages: 317-353

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Handle: RePEc:cup:endeec:v:17:y:2012:i:03:p:317-353_00
Contact details of provider: Postal: Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK
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  1. William D. Nordhaus, 2002. "The Health of Nations: The Contribution of Improved Health to Living Standards," Cowles Foundation Discussion Papers 1355, Cowles Foundation for Research in Economics, Yale University.
  2. מחקר - ביטוח לאומי, 2006. "Annual Survey 2005," Working Papers 15, National Insurance Institute of Israel.
  3. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
  4. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, vol. 13(2), pages 333-56, May.
  5. Pearce, David W. & Atkinson, Giles D., 1993. "Capital theory and the measurement of sustainable development: an indicator of "weak" sustainability," Ecological Economics, Elsevier, vol. 8(2), pages 103-108, October.
  6. Kenneth J. Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "The genuine savings criterion and the value of population," Economic Theory, Springer, vol. 21(2), pages 217-225, 03.
  7. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004," CEPR Discussion Papers 5644, C.E.P.R. Discussion Papers.
  8. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer.
  9. Dasgupta, Partha, 2001. "Human Well-Being and the Natural Environment," OUP Catalogue, Oxford University Press, number 9780199247882, July.
  10. repec:reg:rpubli:132 is not listed on IDEAS
  11. Hamilton, Kirk, 1994. "Green adjustments to GDP," Resources Policy, Elsevier, vol. 20(3), pages 155-168, September.
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