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Sustainability and the Measurement of Wealth

Author

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  • Kenneth J. Arrow
  • Partha Dasgupta
  • Lawrence H. Goulder
  • Kevin J. Mumford
  • Kirsten Oleson

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.

Suggested Citation

  • Kenneth J. Arrow & Partha Dasgupta & Lawrence H. Goulder & Kevin J. Mumford & Kirsten Oleson, 2010. "Sustainability and the Measurement of Wealth," NBER Working Papers 16599, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:16599
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    References listed on IDEAS

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    1. Gary S. Becker & Tomas J. Philipson & Rodrigo R. Soares, 2005. "The Quantity and Quality of Life and the Evolution of World Inequality," American Economic Review, American Economic Association, vol. 95(1), pages 277-291, March.
    2. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
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    More about this item

    JEL classification:

    • D69 - Microeconomics - - Welfare Economics - - - Other
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q39 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Other

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