When economists speak about a country’s “comprehensive wealth”, they are referring to a nation’s assets that are used to generate income. These include produced capital such as infrastructure, natural capital such as natural resources and human and social capital.
When you add up these assets, you get Gross Domestic Product (GDP), the value of the products and services that a country produces over a period of time.
GDP has always been the traditional measure of a nation’s size and growth but sustainability development goals have called for accounting for the “cost of production” or the depletion of natural resources in the course of economic activity. If we don’t know how much natural capital has been used up, how do we know how much we have left?
A more comprehensive way of computing for a nation’s income is through environmentally adjusted macroeconomic indicators.
Macroeconomic indicators such as ADJUSTED NET SAVINGS measure not only physical and human capital but also include natural capital and inputs the cost of environmental degradation and pollution damages.
ADJUSTED NET INCOME, on the other hand, measures available income that can be consumed or invested to increase the nation’s future consumption, adjusted for the depletion of natural capital.
The inclusion of ADJUSTED NET SAVINGS and ADJUSTED NET INCOME in the government’s macroeconomic indicators will provide a measure to see if growth is sustainable or not.
Watch the following video to find out more about computing for environmentally adjusted macroeconomic indicators and how they can help policymakers map out growth plans that are both inclusive and sustainable.