Publisher : Open Government Licence (OGL)
Place of publication : London
Publication year : 2021
Thematic : Economics and Biodiversity
Language : English
Note
The Review demonstrates that in order to judge whether the path of economic development
we choose to follow is sustainable, nations need to adopt a system of economic accounts that
records an inclusive measure of their wealth. The qualifier ‘inclusive’ says that wealth includes
Nature as an asset. The contemporary practice of using Gross Domestic Product (GDP) to judge
economic performance is based on a faulty application of economics. GDP is a flow (so many
market dollars of output per year), in contrast to inclusive wealth, which is a stock (it is the
social worth of the economy’s entire portfolio of assets). Relatedly, GDP does not include the
depreciation of assets, for example the degradation of the natural environment (we should
remember that ‘G’ in GDP stands for gross output of final goods and services, not output net
of depreciation of assets). As a measure of economic activity, GDP is indispensable in short-run
macroeconomic analysis and management, but it is wholly unsuitable for appraising investment
projects and identifying sustainable development. Nor was GDP intended by economists who
fashioned it to be used for those two purposes. An economy could record a high rate of
growth of GDP by depreciating its assets, but one would not know that from national statistics.
The chapters that follow show that in recent decades eroding natural capital has been precisely
the means the world economy has deployed for enjoying what is routinely celebrated as
‘economic growth’. The founding father of economics asked after The Wealth of Nations, not
the GDP of nations. The idea of wealth that is developed in the Review is, not surprisingly, a
lot richer than the one Adam Smith was able to fashion, but his identification of assets as the
objects of interest was exactly right.
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Keywords : Bark beetles
Encoded by : Lilibeth R. Cabebe2
