Some Unpleasant Natural Resource Accounting Arithmetic: The Welfare Inconsitency of
Advocates of natural resource accounting argue for the revision and refonnulation of national accounting practices in order to better account for the depletion and degradation of a nation's resource stocks and environmental assets. The literature is predicated on three key assumptions: that national income is an important policy variable ("social objective function"); that current accounting practices are poorly designed as social objective functions and lead to bad policy-making; and that improving the construction of key accounting aggregates will result in improvements in policy decisions and outcomes. The purpose of this paper is to examine the third of these claims. I introduce the "we1fare-consistency" criterion, which is satisfied when changes in a "comprehensive income" measure are positively correlated with changes in welfare. A series of simple counter-examples in a cake-eating economy is presented to show that this criterion is not generally satisfied by modifications proposed in the resource accounting literature. The divergence between income and welfare is explicable in tenns of consumer surplus, which plays a role in welfare but not in income. An example using renewable resources is also presented to show that sustainable equilibria may not be welfare-consistent.
|Date of creation:||2000|
|Contact details of provider:|| Postal: Department of Economics, The University of Melbourne, 4th Floor, FBE Building, Level 4, 111 Barry Street. Victoria, 3010, Australia|
Phone: +61 3 8344 8560
Fax: +61 3 8344 6899
Web page: http://fbe.unimelb.edu.au/economics
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dasgupta, P., 1990. "The Environment as Commodity.i," Research Paper 84, World Institute for Development Economics Research.
- William D. Nordhaus & James Tobin, 1973.
"Is Growth Obsolete?,"
NBER Chapters,in: The Measurement of Economic and Social Performance, pages 509-564
National Bureau of Economic Research, Inc.
- William D. Nordhaus & James Tobin, 1972. "Is Growth Obsolete?," NBER Chapters,in: Economic Research: Retrospect and Prospect, Volume 5, Economic Growth, pages 1-80 National Bureau of Economic Research, Inc.
- William D. Nordhaus & James Tobin, 1971. "Is Growth Obsolete?," Cowles Foundation Discussion Papers 319, Cowles Foundation for Research in Economics, Yale University.
- Bradford, David F, 1990. "Extended Accounts for National Income and Product: Comment," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1183-1186, September.
- Hartwick, John M., 1990. "Natural resources, national accounting and economic depreciation," Journal of Public Economics, Elsevier, vol. 43(3), pages 291-304, December.
- John M. Hartwick, 1990. "Natural Resources, National Accounting and Economic Depreciation," Working Papers 771, Queen's University, Department of Economics.
- Sefton, J. A. & Weale, M. R., 1996. "The net national product and exhaustible resources: The effects of foreign trade," Journal of Public Economics, Elsevier, vol. 61(1), pages 21-47, July.
- Asheim, Geir B., 1996. "Capital gains and net national product in open economies," Journal of Public Economics, Elsevier, vol. 59(3), pages 419-434, March.
- Brekke, Kjell Arne, 1994. " Net National Product as a Welfare Indicator," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(2), pages 241-252.
- Per-Olov Johansson & Karl-Gustaf Löfgren, 1996. "On the interpretation of ‘green’ NNP measures as cost-benefit rules," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 7(3), pages 243-250, April.
- Dasgupta, Partha, 1990. "The Environment as a Commodity," Oxford Review of Economic Policy, Oxford University Press, vol. 6(1), pages 51-67, Spring.
- Hamilton, Kirk, 1994. "Green adjustments to GDP," Resources Policy, Elsevier, vol. 20(3), pages 155-168, September.
- Scott, Maurice, 1990. "Extended Accounts for National Income and Product: A Comment," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1172-1179, September.
- Karl-Göran Mäler, 1991. "National accounts and environmental resources," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 1(1), pages 1-15, March.
- Kjell Arne Brekke, 1997. "Hicksian Income from Resource Extraction in an Open Economy," Land Economics, University of Wisconsin Press, vol. 73(4), pages 516-527.
- Common,Michael, 1995. "Sustainability and Policy," Cambridge Books, Cambridge University Press, number 9780521436052, September. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:mlb:wpaper:765. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Muntasha Meemnun Khan)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.