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Value and income

  • Cairns, Robert D.

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolecon

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  1. Solow, Robert, 1993. "An almost practical step toward sustainability," Resources Policy, Elsevier, vol. 19(3), pages 162-172, September.
  2. Y. Hossein Farzin, 2006. "Conditions for Sustainable Optimal Economic Development," Review of Development Economics, Wiley Blackwell, vol. 10(3), pages 518-534, 08.
  3. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
  4. Robert Cairns, 2003. "Reconciling the Green Accounts," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 25(1), pages 51-63, May.
  5. John C. V. Pezzey, 2001. "Sustainability Policy and Environmental Policy," Economics and Environment Network Working Papers 0104, Australian National University, Economics and Environment Network.
  6. Vincent Martinet & Gilles Rotillon, 2007. "Invariance in growth theory and sustainable development," Working Papers 23893, Institut National de la Recherche Agronomique, France.
  7. 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.
  8. Geir B. Asheim & Wolfgang Buchholz, 2002. "A General Approach to Welfare Measurement through National Income Accounting," CESifo Working Paper Series 831, CESifo Group Munich.
  9. 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.
  10. Robert D. Cairns, 2002. "Green national income and expenditure," Canadian Journal of Economics, Canadian Economics Association, vol. 35(1), pages 1-15, February.
  11. 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.
  12. J Sefton & M Weale, 2005. "The Concept of Income in a General Equilibrium," NajEcon Working Paper Reviews 122247000000000844, www.najecon.org.
  13. Cairns, Robert D., 2002. "Green accounting using imperfect, current prices," Environment and Development Economics, Cambridge University Press, vol. 7(02), pages 207-214, May.
  14. Weitzman, Martin L, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 156-62, February.
  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.
  16. Cairns, Robert D., 2000. "Sustainability accounting and green accounting," Environment and Development Economics, Cambridge University Press, vol. 5(01), pages 49-54, February.
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