On the Welfare Significance of National Product in a Dynamic Economy

Weitzman, Martin L.

doi:10.2307/1886092

Cited by 690 publications

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“…In the words of (Samuelson, 1961, p. 53): "We are left left with the pessimistic conclusion that there is so much 'futurity' in any welfare evaluation of any dynamic situation as to make it exceedingly difficult for the statistician to approximate to the proper wealth comparisons." Fortunately, Weitzman (1970Weitzman ( , 1976) and later contributions show that Samuelson was overly pessimistic. By combining his (10) with the equation prior to his (14), one can see that Weitzman (1976) demonstrates, under the assumptions of discounted utilitarianism and an optimal ram, that welfare is improving if and only if the value of net investments is positive, as reported in the present Proposition 1(b).…”

Section: Review Of Relevant Literaturementioning

confidence: 99%

“…In Section 2, I give an interpretation of the basic insights and results of welfare accounting, as developed by Samuelson (1961), Weitzman (1970Weitzman ( , 1976, and 3 Dixit et al (1980). In particular, Samuelson (1961) argues that welfare changes should be measured by the present value of future changes in consumption, an insight that Heal and Kriström have brought to our attention through various contributions during the last years (see, e.g., Heal and Kriström, 2005).…”

Section: Introductionmentioning

confidence: 97%

“…While Samuelson (1961, p. 51) writes that " [o]ur rigorous search for a meaningful welfare concept has led to a rejection of all current income concepts ...", Weitzman (1976), in his seminal contribution, shows that greater nnp indicates higher welfare if (a) dynamic welfare equals the sum of utilities discounted at a constant rate (i.e., discounted utilitarianism), and (b) current utility equals the market value of the consumed goods and services (i.e., a linearly homogeneous utility function).…”

Section: Introductionmentioning

confidence: 99%

“…Morover, Weitzman (1970Weitzman ( , 1976 shows that there are conditions under which welfare changes can be measured by changes in utility-nnp, and through this, establishes the link between welfare improvement and a positive value of net investments (cf. Weitzman, 1976, equation above (14)).…”

Section: Introductionmentioning

confidence: 99%

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Can NNP be used for welfare comparisons?

Asheim¹

2007

Envir. Dev. Econ.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper contains a critical assessment of the claim that nnp can be used for welfare comparisons. The analysis assumes that national accounts are comprehensive (in particular, "greened" by taking into account environmental amenities and natural resource depletion), but does not assume optimal resource allocation. The general conclusion is that greater nnp does not correspond to welfare enhancement, unless the net investment flows are revalued. Real utility-nnp, and real measurable nnp made comparable across time by means of a consumer price index, allow for such revaluation, and thus indicate welfare improvement. Terms of use: Documents inKeywords and Phrases: National income accounting, dynamic welfare JEL Classification Numbers: C43, D60, O47, Q01 * I thank participants at the 12th Ulvön Conference on Environmental Economics for helpful comments.Address: Department of Economics, University of Oslo, P.O. Box 1095 Blindern, NO-0317 Oslo, Norway (e-mail: g.b.asheim@econ.uio.no) 1 Summary This paper contains a critical assessment of the claim that comprehensive net national product (nnp) can be used for welfare comparisons. The assertion that nnp is endowed with welfare significance has been subject to controversy, from the seminal contributions by Samuelson and Weitzman to a number of more recent articles. Here I contribute to this debate in the following two ways:1. I give an interpretation of the basic insights and results of welfare accounting in a general setting.2. Building on these insights I warn against using nnp for measuring the welfare effects of capital perturbations, and derive the result that real nnp growth in variable consumption and net investment prices can be used to indicate welfare improvement.The general conclusion is that greater nnp does not correspond to welfare enhancement, unless the net investment flows are revalued. Real utility-nnp, and real measurable nnp made comparable across time by means of a consumer price index, allow for such revaluation, and thus indicate welfare improvement. I reconcile my results with the findings presented in the relevant literature. I use the Dasgupta-Heal-Solow model to illustrate the analysis and results.I invoke weak assumptions concerning how dynamic welfare is derivedby not necessarily assuming discounted utilitarianism-and how the economy functions-by not necessarily assuming an optimal resource allocation mechanism. Throughout I am concerned with local comparisons, either "small...

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Section: Review Of Relevant Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Can NNP be used for welfare comparisons?

Asheim¹

2007

Envir. Dev. Econ.

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“…If consumers allocate their consumption so that the marginal utility of the last dollar spent on each product is equal, the prices will represent consumers' relative valuation of goods and services. Weitzman (1976) has shown that under certain conditions, maximizing net domestic product (GDP less depreciation) will maximize welfare. (Net domestic product is sometimes described as the amount of production necessary to maintain consumption while putting aside a sufficient amount to replace the capital stock used up in production.…”

Section: Market Valuation and Aggregationmentioning

confidence: 99%

National Time Accounting and National Economic Accounting

Landefeld¹,

Villones²

2009

Measuring the Subjective Well-Being of Nations

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Indicators and metrics for the assessment of climate engineering

et al. 2017

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Selecting appropriate indicators is essential to aggregate the information provided by climate model outputs into a manageable set of relevant metrics on which assessments of climate engineering (CE) can be based. From all the variables potentially available from climate models, indicators need to be selected that are able to inform scientists and society on the development of the Earth system under CE, as well as on possible impacts and side effects of various ways of deploying CE or not. However, the indicators used so far have been largely identical to those used in climate change assessments and do not visibly reflect the fact that indicators for assessing CE (and thus the metrics composed of these indicators) may be different from those used to assess global warming. Until now, there has been little dedicated effort to identifying specific indicators and metrics for assessing CE. We here propose that such an effort should be facilitated by a more decision-oriented approach and an iterative procedure in close interaction between academia, decision makers, and stakeholders. Specifically, synergies and trade-offs between social objectives reflected by individual indicators, as well as decision-relevant uncertainties should be considered in the development of metrics, so that society can take informed decisions about climate policy measures under the impression of the options available, their likely effects and side effects, and the quality of the underlying knowledge base.

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On the Welfare Significance of National Product in a Dynamic Economy

Cited by 690 publications

References 0 publications

Can NNP be used for welfare comparisons?

Can NNP be used for welfare comparisons?

National Time Accounting and National Economic Accounting

Indicators and metrics for the assessment of climate engineering

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