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How Should We Measure Sustainable Income?

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Abstract

Growing concerns about long-run economic growth have led to calls for measures of "sustainable income." Traditional analyses rely on Hicksian income, which is consumption plus net investment. The present paper shows that Hicksian income corresponds to sustainable income only under implausibly limited circumstances. We define sustainable income and estimate its magnitude for the United States. The analysis and empirical estimates indicate, first, that consumption has historically been far below sustainable income; second, that conventional Hicksian measures of national income are poor proxies for sustainable income; and, third, that the true savings rate has declined significantly in the last two decades.

Suggested Citation

  • William D. Nordhaus, 1995. "How Should We Measure Sustainable Income?," Cowles Foundation Discussion Papers 1101, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:1101
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    File URL: http://cowles.yale.edu/sites/default/files/files/pub/d11/d1101.pdf
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    Cited by:

    1. Martin L. Weitzman, 1999. "Pricing the Limits to Growth from Minerals Depletion," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 691-706.
    2. Weitzman, Martin L. & Lofgren, Karl-Gustaf, 1997. "On the Welfare Significance of Green Accounting as Taught by Parable," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 139-153, February.
    3. Areendam Chanda, 2002. "Can Skill Biased Technological Progress Have a Role in the Decline of the Savings Rate?," Macroeconomics 0202004, University Library of Munich, Germany.
    4. Weitzman, Martin L., 1998. "On the welfare significance of national product under interest-rate uncertainty," European Economic Review, Elsevier, vol. 42(8), pages 1581-1594, September.
    5. Cook, David & Davidsdottir, Brynhildur & Petursson, Jón Geir, 2015. "Accounting for the utilisation of geothermal energy resources within the genuine progress indicator—A methodological review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 211-220.
    6. Martin L Weitzman, 1999. "A Contribution to the Theory of Welfare Comparisons," Harvard Institute of Economic Research Working Papers 1864, Harvard - Institute of Economic Research.
    7. David Pearce & Giles Atkinson, 1998. "Concept of sustainable development: An evaluation of its usefulness 10 years after Brundtland," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 1(2), pages 95-111, December.
    8. Australian Treasury, 2001. "Global poverty and inequality in the 20th century: turning the corner?," Economic Roundup, The Treasury, Australian Government, issue 1, pages 1-52, May.
    9. Chanda, Areendam, 2008. "The rise in returns to education and the decline in household savings," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 436-469, February.
    10. Alexandre Rambaud & Jacques Richard, 2015. "Towards a finance that CARES," Post-Print halshs-01260075, HAL.
    11. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09hi4j70a29 is not listed on IDEAS
    12. Céline Antonin & Thomas Melonio & Xavier Timbeau, 2012. "L'epargne nette ré-ajustée," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 259-286.
    13. Fleurbaey, Marc, 2015. "On sustainability and social welfare," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 34-53.
    14. Beça, Pedro & Santos, Rui, 2010. "Measuring sustainable welfare: A new approach to the ISEW," Ecological Economics, Elsevier, vol. 69(4), pages 810-819, February.

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