Arrow, K. J., Dasgupta, P., Goulder, L. H., Mumford, K. J. and Oleson, K.

Sustainability and the measurement of wealth

Environment and Development Economics

Vol. 17(3) (2012)

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.

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

Author links: Partha Dasgupta  

Publisher's Link: http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=8599657&fulltextType=DS&fileId=S1355770X12000137