Skip to main content Accessibility help

Sustainability and the measurement of wealth

  • Kenneth J. Arrow (a1), Partha Dasgupta (a2), Lawrence H. Goulder (a3), Kevin J. Mumford (a4) and Kirsten Oleson (a5)...


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.



Hide All
Arrow, K.J., Dasgupta, P., Goulder, L., Daily, G., Ehrlich, P.R., Heal, G.M., Levin, S., Mäler, K.-G., Schneider, S., Starrett, D.A., and Walker, B. (2004), ‘Are we consuming too much?’, Journal of Economic Perspectives 18(1): 147172.
Arrow, K.J., Dasgupta, P., Goulder, L.H., Mumford, K., and Oleson, K. (2007), ‘China, the U.S., and sustainability: perspectives based on comprehensive wealth’, Mimeo, Department of Economics, Stanford University.
Asheim, G. (1997), ‘Adjusting green NNP to measure sustainability’, Scandinavian Journal of Economics 99: 355370.
Becker, G.S., Philipson, T.J., and Soares, R.S. (2005), ‘The quantity and quality of life and the evolution of world inequality’, American Economic Review 95(1): 227291.
BP (2005), Statistical Review of World Energy, June 2005, [Available at]
Dasgupta, P. (2001), Human Well-Being and the Natural Environment, Oxford: Oxford University Press.
Dasgupta, P. and Mäler, K.-G. (2000), ‘Net national product, wealth, and social well-being’, Environment and Development Economics 5(1): 6993.
Food and Agriculture Organization (2006), ‘Global Forest Resources Assessment 2005’, United Nations FAO Forestry Paper No. 147. Rome: FAO.
Hamilton, K. and Clemens, M. (1999), ‘Genuine savings rates in developing countries’, World Bank Economic Review 13(2): 333356.
Hartwick, J.M. (1977), ‘Intergenerational equity and the investing of rents from exhaustible resources’, American Economic Review 66(5): 972974.
Hicks, J.R. (1940), ‘The valuation of social income’, Economica 7: 105124.
Houghton, R.A. (2005), ‘Aboveground forest biomass and the global carbon balance’, Global Change Biology 11: 945958.
Jones, C.I. and Klenow, P.J. (2010), ‘Beyond GDP? Welfare across countries and time’, Working Paper, September, Stanford University.
Klenow, P.J. and Rodríguez-Clare, A. (1997), ‘The neoclassical revival in growth economics: has it gone too far?’, in Bernanke, B. and Rotemberg, J. (eds), NBER Macroeconomics Annual 1997, Cambridge, MA: MIT Press.
Klenow, P.J. and Rodríguez-Clare, A. (2005), ‘Externalities and growth’, in Aghion, P. and Durlauf, S. (eds), Handbook of Economic Growth, Amsterdam: North Holland.
Lane, P.R. and Milesi-Ferretti, G.M. (2007), ‘The external wealth of nations Mark II: revised and extended estimates of foreign assets and liabilities, 1970–2004’, Journal of International Economics 73(2): 223250.
Lindahl, E.R. (1934), ‘The concept of income’, in Bagge, G. (ed.), Economic Essays in Honor of Gustaf Cassel, London: George Allen and Unwin.
Murphy, K.M. and Topel, R.H. (2006), ‘The value of health and longevity’, Journal of Political Economy 114(5): 871904.
Nordhaus, W.D. (2002), ‘The health of nations: the contribution of improved health to living standards’, NBER Working Paper No. 8818, NBER, Cambridge, MA.
Nordhaus, W.D. and Boyer, J. (2000), Warming the World: Economic Models of Global Warming, Cambridge, MA: MIT Press.
Nordhaus, W. and Tobin, J. (1972), ‘Is economic growth obsolete?’, in Economic Growth, 5th Anniversary Colloquium of the NBER, New York: Columbia University Press.
Pearce, D.W. and Atkinson, G. (1993), ‘Capital theory and the measurement of sustainable development: an indicator of weak sustainability’, Ecological Economics 8: 103108.
Pezzey, J. (1992), ‘Sustainable development concepts: an economic analysis’, World Bank Environment Paper No. 2, World Bank: Washington, DC.
Repetto, R., Magrath, W., Wells, M., Beer, C., and Rossini, F. (1989), Wasting Assets: Natural Resources in the National Income Accounts, Washington, DC: World Resources Institute.
Samuelson, P.A. (1961), ‘The evaluation of “social income”: capital formation and wealth’, in Lutz, F.A. and Hague, D.C. (eds), The Theory of Capital, London: MacMillan.
Sefton, J. and Weale, M.R. (1996), ‘The net national product and exhaustible resources’, Journal of Public Economics 61: 2147.
Solow, R.M. (1974), ‘Intergenerational equity and exhaustible resources’, Review of Economic Studies 41 (Symposium Issue): 2945.
Tol, R.S.J. (2009), ‘The economic effects of climate change’, Journal of Economic Perspectives 23(2): 2951.
US Geological Survey (2006), Mineral Commodity Summaries 2006, Washington, DC: US Government Printing Office.
Viscusi, W.K. and Aldy, J.E. (2003), ‘The value of a statistical life: a critical review of market estimates throughout the world’, Journal of Risk and Uncertainty 27(1): 576.
Bank, World (1997), Expanding the Measure of Wealth: Indicators of Environmentally Sustainable Development, Washington, DC: World Bank.
Bank, World (2006), Where is the Wealth of Nations?, Washington, DC: World Bank.
Bank, World (2011), The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium, Washington, DC: World Bank.
World Commission on Environment and Development (1987), Our Common Future, New York: Oxford University Press.

Sustainability and the measurement of wealth

  • Kenneth J. Arrow (a1), Partha Dasgupta (a2), Lawrence H. Goulder (a3), Kevin J. Mumford (a4) and Kirsten Oleson (a5)...


Altmetric attention score

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed