IHDP’s Executive Director Professor Anantha Duraiappah and Academic Officer Dr. Pablo Muñoz co-authored a paper on inclusive wealth as a framework for sustainable development recently published as a commentary article in the June issue of Environment and Development Economics.
This issue features a symposium centered around a paper on "Sustainability and the Measurement of Wealth" by Nobel Laureate Kenneth Arrow and authors of the Inclusive Wealth Report 2012 like Partha Dasgupta, Kevin Mumford and Kirsten Oleson, with a series of complementary articles. The journal can be viewed here.
Prof. Duraiappah and Dr. Muñoz say, “We only manage what we measure,” arguing that gross domestic product (GDP), the indicator most commonly used to determine society’s progress, does not assess whether a country is on a sustainable path and thus does not suffice to guide policy-making.
Instead they propose the concept of inclusive wealth, which assesses the productive base of a country. Computing a nation’s capital assets, namely productive, human and natural capital and their changes over time, will provide a far more accurate and comprehensive picture of overall wealth, they say. Furthermore, it provides a tangible measure for governments to guide macroeconomic planning and investment.
The authors encourage the United Nations to use the framework as a tool and methodology to help countries improve well-being, not just economic wealth, by ensuring that they are following a sustainable path.
Besides introducing the concept of inclusive wealth accounts, the article also addresses the notion of substitutability of natural capital with other forms of capital and makes a reference to how changes in population and interconnected externalities like climate change are taken into account. It also makes remarks upon the concept of shadow prices.
The inclusive wealth framework forms the basis of the first Inclusive Wealth Report (IWR), which UNU-IHDP will be releasing at a joint side event with the UN Environment Programme (UNEP) at the Rio+20 UN Conference on Sustainable Development on June 17th, 1:00pm - 2:45pm local time. The report features changes in inclusive wealth from 1990 to 2008 and includes a long-term comparison to GDP for an initial group of 20 countries.