consumption expenditures. Damages caused by pollution affect estimates of national income only to the extent that they influence productivity and even those effects are not separately identified in the accounts. Waste disposal services provided by air, land, and water in absorbing pollution are assigned a zero value because no one charges for them. The benefits of maintaining natural resources and a clean environment, such as preservation of biodiversity and enhanced recreation opportunities, are ignored for the same reason. These acts of omission and commission make it difficult for analysts to trace the linkages between environmental and natural resource policies and employment, trade balances and growth in GDP.

A comprehensive amending of the accounts to correct for this deficient treatment would require three kinds of revisions: (1) expanding the asset boundary to record changes in environmental quality and natural resource assets; (2) expanding the production boundary to include services of natural resources and the environment that are not counted in measures of national income such as GDP; and (3) reorganizing the production boundary to more clearly identify the input of environmental factor service flows and the costs of reducing pollution damages counted in GDP.

The data needed to make these revisions to the accounts could provide information that would be potentially useful in many policy debates. Some of the more important issues are the effect of environmental protection on economic growth, the distributional impacts of environmental and natural resource policies, and the linkages between trade and environmental and resource policies. In addition, compiling a set of more integrated information on natural resources and the environment could yield new insights into the workings of the economy and represent an important step towards a goal of producing a measure of national income compatible with the concept of sustainable income.

The National Income and Product Accounts measure the flow of products and income in the U.S. economy. The product side of the national accounts measures the flow of goods and services currently produced in the economy. The income side of the accounts measures the income earned by factors (inputs) contributing to the production of these outputs. The two sides of the accounts represent two different measures of the same continuous flow.

The economic model underlying the accounts assumes that the production of any good or service can be linked to the flow of services provided by capital assets. That is, the goods and services sold in the market reflect the capital services of the plant and equipment used in their manufacture. Table 3-1 lists the major types of fixed capital and examples of service flows from that capital. The two general types of capital stock are reproducible capital and natural capital. Reproducible capital is subdivided into privately-owned and publicly-owned tangible capital and human capital. Natural capital is divided between the environment and natural resource reserves.

Front Matter (R1-R10)

Overview (1-16)

1 An Almost Practical Step Toward Sustainability (17-29)

2 What Can Policymakers Learn From Natural Resource Accounting? (30-46)

3 The Feasibility of Incorporating Environmental and Natural Resource Availablility Into the National Accounts (47-58)

4 Sustainable Resource Accounting (59-66)

5 Transfer Models for Green Accounting: An Approach to Environmental Policy Analysis for Sustainable Development (67-110)

6 Natural Resource and Environmental Accounting in U.S. Agriculture (111-131)

7 Natural Resource Accounting for the Forestry Sector: Valuation Techniques and Policy Implications in Thailand (132-145)

8 Soil Quality in Relation to Value and Sustainable Management (146-164)

9 Valuing Biodiversity: An Application of Green Accounting (165-178)

Appendix: Workshop Planners and Participants (179-186)