. "2 The National Income and Product Accounts: History and Application to the Environment." Nature's Numbers: Expanding the National Economic Accounts to Include the Environment. Washington, DC: The National Academies Press, 1999.
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about the sustainability of current decisions. As suggested earlier, it is conventional in economic analyses to define sustainable national income as the maximum amount that can be consumed while ensuring that all future generations can have living standards that are at least as high as those of the current generation.6 Economic welfare, in this view, consists of per capita consumption of goods and services, both market and nonmarket. Consumption includes market items such as food, shelter, and entertainment; it also includes nonmarket items such as home-cooked meals or camping.7
What is the relationship between current measures of national output, such as net domestic product (NDP), and sustainable income? One of the most surprising results of modern economic theory is the output-sustainability correspondence principle (see Appendix A). This principle holds that under idealized conditions, net national product and sustainable income are identical. More precisely, when population is constant, when the national accounts include all stocks of capital and other dynamic features that affect production, and when markets accurately capture the entire social value of economic activity, NDP is an appropriate measure of sustainable income. In other words, the sum of total consumption and net capital formation is equivalent to the maximum sustainable amount of per capita consumption an economy can maintain indefinitely. Under idealized conditions, then, extending the NIPA to include comprehensive measures of consumption and net investment would make output and income more accurate indexes of sustainable income.8
The output-sustainability correspondence is of fundamental importance for guiding decisions about the design of the NIPA. However, important practical and theoretical qualifications to this principle must be emphasized. Augmented NDP will fail to measure sustainable income
It should be emphasized that the definition of sustainability used here is chosen because it is particularly appropriate in the context of designing comprehensive national income accounts. Literally dozens of definitions and approaches have been suggested, and others may be more appropriate in different contexts.
The economic approach to sustainability excludes many important individual values and collective activities because economic measurements do not go beyond the boundary of what can be directly or indirectly denominated in monetary units. The approach also considers the level of average or per capita consumption today and in the future. This high level of aggregation masks a number of important ways of disaggregating the complex ensemble of environmental and economic activities: it does not distinguish among the different future generations; it overlooks the distribution of consumption among different groups within a country or among countries; and it does not deal with issues of risk.
This proposition dates back to Weitzman (1976). For a recent comprehensive treatment of the subject, see Aronsson et al. (1997).