Disregarded capitals: what national accounting ignores

In this paper, I review - and to an extent further develop - a methodology of national accounting that responds to the needs of governments when they engage in sustainability and policy analyses. Those needs would be served only if national accounts were directed at estimating the economy's wealth (which is the social worth of an economy's entire stock of capital assets), not growth in gross domestic product or improvements in the many ad hoc indicators of human development that have been proposed in recent years. Concurrently, I show that by poverty, we should mean a low level of wealth, not income, and that the distribution of human well-being ought to be judged in terms of the distribution of wealth, not income or education, or any of the several indicators that are currently in use. I show that the concept of wealth invites us to extend the notion of assets and the idea of investment well beyond conventional usage. This perspective has radical implications for the way national accounts are prepared and interpreted. I then sketch a recent publication that has put the theory to work by studying the composition of wealth accumulation in contemporary India. Private firms routinely produce balance sheets. Nations should do the same.