nation can consume while ensuring that all future generations can have living standards at least as high as those of the current generation.

The NIPA have a close relationship to measures of sustainable income. The usual measure of NDP corresponds to the highest sustainable level of consumption under idealized conditions. The most important conditions underlying this correspondence are the inclusion of all consumption and net investment and the absence of technological change or other dynamic autonomous elements.

Measures of national income and output would be closer to the ideal measure of sustainable income if omitted consumption and net investment were included to obtain augmented income and output measures. Omitted items would include nonmarket consumption, such as home production, and final environmental services and nonmarket investment, such as changes in the value of resource stocks, along with investment in human capital.

When there is unmeasured consumption, investment, autonomous dynamic elements, or revaluation effects, residual terms must be added to reflect the contribution of these factors—positive or negative—to future income. Particularly important residual effects are due to technological change and institutional factors such as the nature of tangible and intellectual property rights and the degree of openness of the economy.



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement