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Sustainability and the Measurement of Wealth

  • Kenneth J. Arrow
  • Partha Dasgupta
  • Lawrence H. Goulder
  • Kevin J. Mumford
  • Kirsten Oleson

We develop a consistent and comprehensive theoretical framework for assessing whether economic growth is compatible with sustaining well-being over time. The framework focuses on whether a comprehensive measure of wealth - one that accounts for natural capital and human capital as well as reproducible capital - is maintained through time. Our framework also integrates population growth, technological change, and changes in health. We apply the framework to five countries that differ significantly in stages of development and resource bases: the United States, China, Brazil, India, and Venezuela. With the exception of Venezuela, significant increases in human capital enable comprehensive wealth to be maintained (and sustainability to be achieved) despite significant reductions in the natural resource base. We find that the value of "health capital" is very large relative to other forms of capital. As a result, its growth rate critically influences the growth rate of per-capita comprehensive wealth.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16599.

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Date of creation: Dec 2010
Date of revision:
Publication status: published as Arrow, Kenneth J. & Dasgupta, Partha & Goulder, Lawrence H. & Mumford, Kevin J. & Oleson, Kirsten, 2012. "Sustainability and the measurement of wealth," Environment and Development Economics, Cambridge University Press, vol. 17(03), pages 317-353, June.
Handle: RePEc:nbr:nberwo:16599
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  1. William D. Nordhaus, 2002. "The Health of Nations: The Contribution of Improved Health to Living Standards," NBER Working Papers 8818, National Bureau of Economic Research, Inc.
  2. repec:reg:rpubli:132 is not listed on IDEAS
  3. Hamilton, Kirk, 1994. "Green adjustments to GDP," Resources Policy, Elsevier, vol. 20(3), pages 155-168, September.
  4. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
  5. Hamilton, Kirk & Clemens, Michael, 1999. "Genuine Savings Rates in Developing Countries," World Bank Economic Review, World Bank Group, vol. 13(2), pages 333-56, May.
  6. Pearce, David W. & Atkinson, Giles D., 1993. "Capital theory and the measurement of sustainable development: an indicator of "weak" sustainability," Ecological Economics, Elsevier, vol. 8(2), pages 103-108, October.
  7. Dasgupta, Partha, 2001. "Human Well-Being and the Natural Environment," OUP Catalogue, Oxford University Press, number 9780199247882.
  8. Kenneth Arrow & Partha Dasgupta & Lawrence Goulder & Gretchen Daily & Paul Ehrlich & Geoffrey Heal & Simon Levin & Karl-Göran Mäler & Stephen Schneider & David Starrett & Brian Walker, 2004. "Are We Consuming Too Much?," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 147-172, Summer.
  9. Richard S. J. Tol, 2009. "The Economic Effects of Climate Change," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 29-51, Spring.
  10. מחקר - ביטוח לאומי, 2006. "Annual Survey 2005," Working Papers 15, National Insurance Institute of Israel.
  11. Kenneth J. Arrow & Partha Dasgupta & Karl-Göran Mäler, 2003. "The genuine savings criterion and the value of population," Economic Theory, Springer, vol. 21(2), pages 217-225, 03.
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