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Testing the predictive power of genuine savings as a long-run indicator of future well-being

Author

Listed:
  • David Greasley
  • Nick Hanley
  • Jan Kunnas
  • Eoin McLaughlin
  • Les Oxley
  • Paul Warde

Abstract

This paper reports the first long-run test of how Genuine Savings (also called comprehensive investment or adjusted net savings) predicts future well-being. The theory of weak sustainability suggests that a country with a positive level of Genuine Savings (GS) should experience non-declining future utility. Despite the widespread uptake of GS, previous tests of its predictive power are for short time intervals. We assemble data for British capital back to 1750, and construct several net investment measures which are used to predict two alternative measures of future well-being: future consumption per capita and real wages. An allowance for a “value of time” due to technological progress is also included. Our results show that GS-type measures can predict changes in future well-being reasonably well over 50 or 100 years into the future.

Suggested Citation

  • David Greasley & Nick Hanley & Jan Kunnas & Eoin McLaughlin & Les Oxley & Paul Warde, 2012. "Testing the predictive power of genuine savings as a long-run indicator of future well-being," CEH Discussion Papers 007, Centre for Economic History, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:hpaper:007
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    File URL: https://cbe.anu.edu.au/researchpapers/CEH/WP201207.pdf
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    References listed on IDEAS

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    1. World Bank, 2011. "The Changing Wealth of Nations : Measuring Sustainable Development in the New Millennium," World Bank Publications - Books, The World Bank Group, number 2252, December.
    2. Trinh Le & John Gibson & Les Oxley, 2006. "A Forward‐Looking Measure Of The Stock Of Human Capital In New Zealand," Manchester School, University of Manchester, vol. 74(5), pages 593-609, September.
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    Cited by:

    1. Greasley, David & Hanley, Nick & McLaughlin, Eoin & Oxley, Les, 2014. "The Emperor Has New Clothes: Empirical Tests of Mainstream Theories of Economic Growth," SIRE Discussion Papers 2015-01, Scottish Institute for Research in Economics (SIRE).
    2. repec:sss:wpaper:201401 is not listed on IDEAS

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    More about this item

    Keywords

    sustainable development; weak sustainability; genuine savings; comprehensive investment; future well-­‐being; British economic history;
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