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Sustainability and the measurement of wealth

Published online by Cambridge University Press:  08 May 2012

Kenneth J. Arrow ,
Partha Dasgupta ,
Lawrence H. Goulder ,
Kevin J. Mumford  and
Kirsten Oleson
Kenneth J. Arrow
Affiliation:
Department of Economics, Stanford University, USA. Email: arrow@stanford.edu
Partha Dasgupta
Affiliation:
Department of Economics, University of Cambridge, UK. Email: pd10000@cam.ac.uk
Lawrence H. Goulder
Affiliation:
Department of Economics, Stanford University, Stanford, CA 94305, USA. Email: goulder@stanford.edu
Kevin J. Mumford
Affiliation:
Department of Economics, Purdue University, USA. Email: mumford@purdue.edu
Kirsten Oleson
Affiliation:
Department of Natural Resources and Environmental Management, University of Hawaii, USA. Email: koleson@hawaii.edu
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Abstract

We develop and apply a consistent and comprehensive theoretical framework for assessing whether economic growth is compatible with sustaining wellbeing over time. Our approach differs from earlier approaches by concentrating on wealth rather than income. Sustainability is demonstrated by showing that a properly defined comprehensive measure of wealth is maintained through time. Our wealth measure is unusually comprehensive, capturing not only reproducible and human capital but also natural capital, health improvements and technological change. We apply the framework to five countries: the United States, China, Brazil, India and Venezuela. We show that the often-neglected contributors to wealth – technological change, natural capital and health capital – fundamentally affect the conclusions one draws about whether given nations are achieving sustainability. Indeed, even countries that display sustainability differ considerably in the kinds of capital that contribute to it.

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Environment and Development Economics , Volume 17 , Issue 3 , June 2012 , pp. 317 - 353
Copyright
Copyright © Cambridge University Press 2012

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