. "3 The Feasibility of Incorporating Environmental and Natural Resource Availablility Into the National Accounts." Assigning Economic Value to Natural Resources. Washington, DC: The National Academies Press, 1994.
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Assigning Economic Value to Natural Resources
resource reserves and identifying reliable and consistent methods of pricing the nonmarket services of these assets.
Estimating changes in the reserves of economically exploitable resources is difficult when market conditions are changing. Measuring net changes in biological resources is difficult because of uncertainties about population growth rates. And aggregate measures of environmental quality mask problems associated with "hot spots" which are well below minimum standards.
Valuing natural resource depletion or environmental degradation depends heavily on techniques to impute prices because many of the services of natural resources and the environment are not sold in markets. The lack of organized markets is especially a problem in valuing service flows associated with the health effects of changes in environmental quality.
If a decision is made to add more information on natural resources and the environment into the accounts, the most immediate concern will be how to proceed with the three types of revisions. The United Nations (UN) and Bureau of Economic Analysis (BEA) have decided to maintain satellite accounts to record measures of the value of natural capital, its depletion, and flow of services, while measurement issues are being resolved. These measures could later be integrated into the main components of the accounts as problems of measurement and data axe resolved.
In addition, initial efforts by the UN and BEA, which are meant to improve their understanding of how best to incorporate natural resources and the environment into the accounts, have relied to a large extent on market data. These initial efforts concentrate on two types of revisions to the accounts: determining the monetary value of environmental asset degradation and resource asset depletion and identifying pollution abatement and control expenditures designed to reduce pollution damages.
The focus of these initial efforts is logical since it is possible to estimate the costs of reducing pollution damages largely from data already collected in compiling the national accounts. Likewise it is possible to estimate environmental degradation and natural resource depletion largely from market data on the costs of maintaining environmental quality and revenues from goods and services from natural resources. In contrast, expanding the production boundary or valuing environmental waste disposal services requires much greater reliance on imputed prices.
Imputed prices are now used in computing aggregate measures such as GDP but are limited to items, such as the value of services of owner-occupied housing, for which much relevant market data exist. Revising the accounts beyond current efforts implies, however, a significantly expanded reliance on imputed prices for valuing services for which there are much less relevant market data. Nevertheless, a gradual process of modifying measures of national economic performance is consistent with our experience since first introducing the national accounts. It is within this context that any effort to incorporate more information on environmental and natural resources into the national accounts should be judged.