Public Wealth and Private Riches: Past and Present

The classical economists defined national wealth as the sum of goods with exchange value. Lauderdale, a contemporary of Adam Smith, drew a distinction between private riches, the classical definition, and public wealth, the sum of all goods with use value. Public wealth included abundant environmental goods such as clean air and water. Lauderdale maintained that private riches could expand due to the scarcity of formerly free, but unmeasured public wealth. Hence the classical measure of wealth would give a misleading indication of the total goods available to society under conditions of environmental scarcity. The classical economists denied the relevance of Lauderdale’s thesis for their time.The modern national economic accounts follow the classical concept in omitting the services of free environmental resources. However, environmental conditions have now changed to the point where Lauderdale’s concept of public wealth is more relevant than the classical concept of private riches. Hence current measures of national economic performance should be revised so they will indicate whether we have more or less total goods and services available to us over time in a world of environmental scarcity.