Sustainabiity and the Measurement of Wealth

Posted: 5 Dec 2010  

Kenneth J. Arrow

Stanford University - Department of Economics

Partha Dasgupta

University of Cambridge - Faculty of Economics and Politics; The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics

Lawrence H. Goulder

Stanford University - Department of Economics; National Bureau of Economic Research (NBER); Resources for the Future

Kevin J. Mumford

Purdue University

Kirsten Oleson

Stanford University

Date Written: October 15, 2010

Abstract

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.

Keywords: Sustainable Development, Sustainability, Comprehensive Wealth, Wealth Accounting, Green Accounting

JEL Classification: Q32, Q39, O10, O47, O50, D69

Suggested Citation

Arrow, Kenneth J. and Dasgupta, Partha and Goulder, Lawrence H. and Mumford, Kevin J. and Oleson, Kirsten, Sustainabiity and the Measurement of Wealth (October 15, 2010). Available at SSRN: https://ssrn.com/abstract=1719670

Kenneth J. Arrow

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States

Partha Dasgupta

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

The Royal Swedish Academy of Sciences - Beijer International Institute of Ecological Economics

The Royal Swedish Academy of Sciences
P.O. Box 50005
S-104 05 Stockholm, SE-104 05
SWEDEN

Lawrence H. Goulder (Contact Author)

Stanford University - Department of Economics ( email )

Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
United States
650-723-3706 (Phone)
650-725-5702 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Resources for the Future

1616 P Street, NW
Washington, DC 20036
United States

Kevin J. Mumford

Purdue University ( email )

West Lafayette, IN 47907-1310
United States
7654966773 (Phone)
7654967434 (Fax)

HOME PAGE: http://www.mgmt.purdue.edu/faculty/kjmumfor/home.asp

Kirsten Oleson

Stanford University ( email )

Stanford, CA 94305
United States

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