Measuring social welfare and sustainability

Article type: Research Article

Authors: Hamilton, Kirk^{; *} | Ruta, Giovanni

Affiliations: Environment Department, The World Bank, 1818 H St. NW, Washington DC 20433, USA. Tel.: +1 202 473 2053; Fax: +1 202 522 1735; E-mail: khamilton@worldbank.org; gruta@worldbank.org

Correspondence: [*] Corresponding author. E-mail: khamilton@worldbank.org.

Abstract: Samuelson [14] suggested that the best measure of social welfare would be a ‘wealth-like’ magnitude. This paper explains the approach to wealth measurement presented in Where is the Wealth of Nations? [18]. We show how deriving a ‘top-down’ estimate of total wealth and ‘bottom-up’ estimates of produced and natural capital can reveal the importance of natural assets as a source of social welfare in low income countries. By measuring the real change in asset values (‘genuine’ saving) we can determine whether social welfare is increasing or decreasing as a result of current policies. Negative genuine saving indicates that future wellbeing will decline – i.e. that the economy is on an unsustainable path. We discuss the extensions to the System of National Accounts (SNA) inherent in this approach.

Keywords: Social welfare, asset accounting, genuine saving, sustainable development

DOI: 10.3233/SJU-2006-23405

Journal: Statistical Journal of the United Nations Economic Commission for Europe, vol. 23, no. 4, pp. 277-288, 2006