1932

Abstract

Inclusive wealth is a measure designed to address whether society is on a sustainable development trajectory. Inclusive wealth is defined as the aggregate value of all capital assets. Increases in inclusive wealth indicate an improved productive base capable of supporting a higher standard of living in the future. To be truly inclusive, measures of inclusive wealth must include the value of all forms of capital that contribute to human well-being: human capital, manufactured capital, natural capital, and social capital. Sustainability concerns have increased attention on the ways of measuring the value of natural capital. We review various attempts to measure natural capital and to incorporate these into inclusive wealth including estimates using national wealth accounts and integrated ecological and economic models used to estimate ecosystem services. Empirically measuring the value of various types of capital in terms of a common metric is hugely challenging, and no current attempt to date can be said to be fully inclusive. Despite the empirical challenges, inclusive wealth provides a clear, coherent, and systematic framework for addressing sustainable development. Combining measures of semi-inclusive wealth that capture forms of capital that can be relatively easily measured in monetary terms with a set of biophysical metrics capturing important aspects of natural capital that are difficult to measure in monetary terms may provide a good set of signals of whether society is proceeding along a sustainable development trajectory.

Loading

Article metrics loading...

/content/journals/10.1146/annurev-environ-101813-013253
2015-11-04
2024-04-23
Loading full text...

Full text loading...

/deliver/fulltext/energy/40/1/annurev-environ-101813-013253.html?itemId=/content/journals/10.1146/annurev-environ-101813-013253&mimeType=html&fmt=ahah

Literature Cited

  1. 1. UN Dev. Program. (UNDP) 2013. Human Development Report 2013: The Rise of the South: Human Progress in a Diverse World New York: UNDP
  2. 2. Millenn. Ecosyst. Assess 2005. Ecosystems and Human Well-Being: Synthesis. Washington, DC: Island
  3. Meadows DH, Meadows DL, Randers J, Behrens WW III. 3.  1972. Limits to Growth New York: Universe
  4. Wackernagel M, Schulz NB, Deumling D, Linares AC, Jenkins M. 4.  et al. 2002. Tracking the ecological overshoot of the human economy. PNAS 99:9266–71 [Google Scholar]
  5. Rockström J, Steffen W, Noone K, Persson Å, Chapin FS III. 5.  et al. 2009. A safe operating space for humanity. Nature 461:472–75 [Google Scholar]
  6. Johnson DG. 6.  2000. Population, food and knowledge. Am. Econ. Rev. 90:1–14 [Google Scholar]
  7. Raudsepp-Hearne C, Peterson GD, Tengö M, Bennett EM, Holland T. 7.  et al. 2010. Untangling the environmentalist's paradox: Why is human well-being increasing as ecosystem services degrade?. BioScience 60:576–89 [Google Scholar]
  8. DeFries R. 8.  2014. The Big Ratchet: How Humanity Thrives in the Face of Natural Crisis New York: Basic
  9. 9.  World Bank 2006. Where Is the Wealth of Nations? Washington, DC: World Bank [Google Scholar]
  10. 10. World Bank 2011. The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium Washington, DC: World Bank
  11. Arrow K, Dasgupta P, Goulder L, Daily G, Ehrlich P. 11.  et al. 2004. Are we consuming too much?. J. Econ. Perspect. 18:147–72 [Google Scholar]
  12. Hamilton K, Clemens M. 12.  1999. Genuine saving rates in developing countries. World Bank Econ. Rev. 13:333–56 [Google Scholar]
  13. Dasgupta P, Mäler K-G. 13.  2000. Net national product, wealth and social well-being. Environ. Dev. Econ. 5:69–93 [Google Scholar]
  14. Dasgupta P. 14.  2001. Human Well-Being and the Natural Environment Oxford: Oxford Univ. Press
  15. Hamilton K, Hartwick J. 15.  2014. Wealth and sustainability. Oxf. Rev. Econ. Policy 30:1170–89 [Google Scholar]
  16. 16. UN Univ. Int. Hum. Dimens. Program. Glob. Change/UN Environ. Program 2012. Inclusive Wealth Report 2012: Measuring Progress Toward Sustainability Cambridge, UK: Cambridge Univ. Press
  17. 17. World Comm. Environ. Dev 1987. Our Common Future. New York: Oxford Univ. Press
  18. 18. UN Stat. Commission 2012. The System of Environmental-Economic Accounting 2012: Central Framework. New York: UN Press
  19. 19. UN Dev. Program. (UNDP) 2014. The 2014 Human Development Report—Sustaining Human Progress: Reducing Vulnerabilities and Building Resilience New York: UNDP
  20. Wackernagel M, Rees W. 20.  1996. Our Ecological Footprint Gabriola Island, BC, Can.: New Society
  21. 21. Eur. Comm., Eurostat 2015. Sustainable Development Indicators http://ec.europa.eu/eurostat/web/sdi/indicators. Accessed Apr. 4, 2015
  22. Christensen LR, Jorgenson DW. 22.  1969. The measurement of U.S. real capital input, 1929–1967. Rev. Income Wealth 15:4293–320 [Google Scholar]
  23. Becker G. 23.  1993. Human Capital: A Theoretical and Empirical Analysis New York: Columbia Univ. Press
  24. Lemieux T. 24.  2006. The “Mincer Equation” thirty years after Schooling, Experience, and Earnings. Jacob Mincer: A Pioneer of Modern Labor Economics S Grossbard 127–45 New York: Springer [Google Scholar]
  25. Kumar P. 25.  2010. The Economics of Ecosystems and Biodiversity (TEEB): Ecological and Economic Foundations London: Earthscan [Google Scholar]
  26. Kareiva P, Tallis H, Ricketts TH, Daily GC, Polasky S. 26.  2011. Natural Capital: Theory and Practice of Mapping Ecosystem Services New York: Oxford Univ. Press
  27. Arrow K, Dasgupta P, Goulder LH, Mumford KJ, Oleson K. 27.  2012. Sustainability and the measurement of wealth. Environ. Dev. Econ. 17:317–53 [Google Scholar]
  28. 28. UN Univ.-Int. Hum. Dimens. Program. Glob. Change/UN Environ. Program 2014. Inclusive Wealth Report 2014: Measuring Progress Toward Sustainability Cambridge, UK: Cambridge Univ. Press
  29. Coleman JS. 29.  1988. Social capital in the creation of human capital. Am. J. Sociol. 94:S95–S120 [Google Scholar]
  30. Stiglitz JE, Sen AK, Fitoussi J-P. 30.  2010. Mis-Measuring Our Lives: Why GDP Doesn't Add Up New York: New Press
  31. Mankiw NG. 31.  2012. Macroeconomics New York: Worth, 8th ed..
  32. Blanchard O, Fischer S. 32.  1989. Lectures on Macroeconomics Cambridge, MA: MIT Press
  33. Solow RM. 33.  1956. A contribution to the theory of economic growth. Q. J. Econ. 70:65–94 [Google Scholar]
  34. Swan TW. 34.  1956. Economic growth and capital accumulation. Econ. Rec. 32:334–61 [Google Scholar]
  35. Daly H. 35.  1996. Beyond Growth Boston: Beacon
  36. Hartwick JM. 36.  1977. Intergenerational equity and the investment of rents from exhaustible resources. Am. Econ. Rev. 67:972–74 [Google Scholar]
  37. Hartwick JM. 37.  1990. Natural resources, national accounting and economic depreciation. J. Public Econ. 43:291–304 [Google Scholar]
  38. 38. UN Dep. Econ. Soc. Aff 2013. World Population Prospects: The 2012 Revision. New York: United Nations
  39. Arrow K, Dasgupta P, Mäler K-G. 39.  2003. The genuine savings criterion and the value of population. Econ. Theory 21:2217–25 [Google Scholar]
  40. Barro RJ, Sala-i-Martin XI. 40.  2003. Economic Growth Cambridge, MA: MIT Press, 2th ed..
  41. Färe R, Grosskopf S, Norris M, Zhang Z. 41.  1994. Productivity growth, technical progress, and efficiency change in industrialized countries. Am. Econ. Rev. 84:66–83 [Google Scholar]
  42. Klenow PJ, Rodrıguez-Clare A. 42.  2005. Externalities and growth. Handbook of Economic Growth P Aghion, S Durlauf 818–61 Amsterdam: North Holland [Google Scholar]
  43. Nordhaus WD, Tobin J. 43.  1972. Is growth obsolete?. Economic Research: Retrospect and Prospect 5 Economic Growth WD Nordhaus, J Tobin 1–80 Cambridge, MA: Natl. Bureau Econ. Res. [Google Scholar]
  44. Repetto R, Magrath W, Wells M, Beer C, Rossini F. 44.  1989. Wasting Assets: Natural Resources and the National Income Accounts Washington, DC: World Resour. Inst.
  45. Pearce D, Atkinson G. 45.  1993. Capital theory and the measurement of sustainable development: an indicator of “weak” sustainability. Ecol. Econ. 8:2103–8 [Google Scholar]
  46. Ollivier T, Giraud PN. 46.  2011. Assessing sustainability, a comprehensive wealth accounting prospect: an application to Mozambique. Ecol. Econ. 70:503–12 [Google Scholar]
  47. Tol RSJ. 47.  2009. The economic effects of climate change. J. Econ. Perspect. 23:229–51 [Google Scholar]
  48. Nordhaus WD, Boyer J. 48.  2000. Warming the World: Economic Models of Climate Change Cambridge, MA: MIT Press
  49. Ferreira SK, Hamilton K, Vincent JR. 49.  2008. Comprehensive wealth and future consumption: accounting for population growth. World Bank Econ. Rev. 22:233–48 [Google Scholar]
  50. Van der Ploeg S, De Groot R. 50.  2010. The TEEB Valuation Database Wageningen, Neth.: Found. Sustain. Dev.
  51. Costanza R, d'Arge R, De Groot R, Farber S, Grasso M. 51.  et al. 1997. The value of the world's ecosystem services and natural capital. Nature 387:253–60 [Google Scholar]
  52. Liu S, Costanza R, Troy A, D'Aagostino J, Mates W. 52.  2010. Valuing New Jersey's ecosystem services and natural capital: a spatially explicit benefit transfer approach. Environ. Manag. 45:61271–85 [Google Scholar]
  53. Nelson E, Mendoza G, Regetz J, Polasky S, Tallis H. 53.  et al. 2009. Modeling multiple ecosystem services, biodiversity conservation, commodity production, and tradeoffs at landscape scales. Front. Ecol. Environ. 7:14–11 [Google Scholar]
  54. Balmford A, Fisher B, Green RE, Naidoo R, Strassburg B. 54.  et al. 2011. Bringing ecosystem services into the real world: an operational framework for assessing the economic consequences of losing wild nature. Environ. Resour. Econ. 48:2161–75 [Google Scholar]
  55. 55. Natl. Ecosyst. Assess 2014. The UK National Ecosystem Assessment: Synthesis of the Key Findings. Cambridge, UK: UNEP-WCMC, LWEC
  56. Villa F, Bagstad KJ, Voigt B, Johnson GW, Portela R. 56.  et al. 2014. A methodology for adaptable and robust ecosystem services assessment. PLOS ONE 9:e91001 [Google Scholar]
  57. Keeler B, Polasky S, Brauman KA, Johnson J, Finlay J. 57.  et al. 2012. Linking water quality and well-being for improved assessment and valuation of ecosystem services. PNAS 109:18619–24 [Google Scholar]
  58. Costello C, Griffin WM, Landis AE, Matthews HS. 58.  2009. Impact of biofuel crop production on the formation of hypoxia in the Gulf of Mexico. Environ. Sci. Technol. 43:207985–91 [Google Scholar]
  59. Huang L, Smith MD. 59.  2011. Management of an annual fishery in the presence of ecological stress: the case of shrimp and hypoxia. Ecol. Econ. 70:688–97 [Google Scholar]
  60. Fenichel EP, Abbott JK. 60.  2014. Natural capital: from metaphor to measurement. J. Assoc. Environ. Resour. Econ. 1:11–27 [Google Scholar]
  61. Bateman IJ, Harwood AR, Mace GM, Watson RT, Abson DJ. 61.  et al. 2013. Bringing ecosystem services into economic decision-making: land use in the United Kingdom. Science 341:45–50 [Google Scholar]
  62. Lawler JJ, Lewis DJ, Nelson E, Plantinga AJ, Polasky S. 62.  et al. 2014. Projected land-use change impacts on ecosystem services in the United States. PNAS 111:207492–97 [Google Scholar]
  63. Polasky S, Nelson E, Pennington D, Johnson K. 63.  2011. The impact of land-use change on ecosystem services, biodiversity and returns to landowners: a case study in the State of Minnesota. Environ. Resour. Econ. 48:2219–42 [Google Scholar]
  64. Goldstein JH, Caldarone G, Duarte TK, Ennaanay D, Hannahs N. 64.  et al. 2012. Integrating ecosystem-service tradeoffs into land-use decisions. PNAS 109:197565–70 [Google Scholar]
  65. Liu J, Li S, Ouyang Z, Tam C, Chen X. 65.  2008. Ecological and socioeconomic effects of China's policies for ecosystem services. PNAS 105:9477–82 [Google Scholar]
  66. Kovacs K, Polasky S, Nelson E, Keeler B, Pennington D. 66.  et al. 2013. Evaluating the return in ecosystem services from investment in public land acquisitions. PLOS ONE 8:6e62202 [Google Scholar]
  67. Fisher B, Turner RK, Burgess ND, Swetnam RD, Green J. 67.  et al. 2011. Measuring, modeling and mapping ecosystem services in the Eastern Arc Mountains of Tanzania. Prog. Phys. Geogr. 35:595–611 [Google Scholar]
  68. Ferraro PJ, Hanauer MM. 68.  2014. Quantifying causal mechanisms to determine how protected areas affect poverty through changes in ecosystem services and infrastructure. PNAS 111:4332–37 [Google Scholar]
  69. Daily GC, Polasky S, Goldstein J, Kareiva PM, Mooney HA. 69.  et al. 2009. Ecosystem services in decision making: time to deliver. Front. Ecol. Environ. 7:21–28 [Google Scholar]
  70. Carpenter SR, Mooney HA, Agard J, Capistrano D, DeFries RS. 70.  et al. 2009. Science for managing ecosystem services: beyond the Millennium Ecosystem Assessment. PNAS 106:1305–12 [Google Scholar]
  71. Dasgupta P. 71.  2008. Nature in economics. Environ. Resour. Econ. 39:11–7 [Google Scholar]
  72. Neumayer E. 72.  2010. Weak Versus Strong Sustainability: Exploring the Limits of Two Opposing Paradigms Cheltenham, UK: Elgar
  73. Ekins P, Sandrine S, Deutsch L, Folke C, De Groot R. 73.  2003. A framework for the practical application of the concepts of critical natural capital and strong sustainability. Ecol. Econ. 44:165–85 [Google Scholar]
  74. Dasupta P. 74.  2009. The welfare economic theory of green national accounts. Environ. Resour. Econ. 42:13–38 [Google Scholar]
  75. Freeman AM III. 75.  2003. The Measurement of Environmental and Resource Value: Theory and Methods Washington, DC: Resour. Future
  76. Wegner G, Pascual U. 76.  2011. Cost-benefit analysis in the context of ecosystem services for human well-being: a multidisciplinary critique. Glob. Environ. Change 21:492–504 [Google Scholar]
  77. Kahneman D. 77.  2011. Thinking, Fast and Slow New York: Farrar, Straus, Giroux
  78. Gintis H. 78.  2000. Beyond Homo economicus: evidence from experimental economics. Ecol. Econ. 35:3311–22 [Google Scholar]
  79. Henrich J, Boyd R, Bowles S, Camerer C, Fehr E. 79.  et al. 2001. In search of Homo economicus: behavioral experiments in 15 small-scale societies. Am. Econ. Rev. 91:273–78 [Google Scholar]
  80. Rabin M. 80.  1998. Psychology and economics. J. Econ. Lit. 36:11–46 [Google Scholar]
  81. Lichtenstein S, Slovic P. 81.  1971. Reversals of preference between bids and choices in gambling decisions. J. Exp. Psychol. 89:146–55 [Google Scholar]
  82. Ariely D. 82.  2009. Predictably Irrational: The Hidden Forces that Shape Our Decisions New York: HarperCollins
  83. Tversky A, Kahneman D. 83.  1981. The framing of decisions and the psychology of choice. Science 211:453–58 [Google Scholar]
  84. Slovic P. 84.  1995. The construction of preference. Am. Psychol. 50:5364–71 [Google Scholar]
  85. Fraser EDG, Dougill AJ, Mabee WE, Reed M, McAlpine P. 85.  2006. Bottom up and top down: analysis of participatory processes for sustainability indicator identification as a pathway to community empowerment and sustainable environmental management. J. Environ. Manag. 78:2114–27 [Google Scholar]
  86. Reed MS, Fraser EDG, Dougill AJ. 86.  2006. An adaptive learning process for developing and applying sustainability indicators with local communities. Ecol. Econ. 59:4406–18 [Google Scholar]
  87. Martinez-Alier J, Munda G, O'Neill J. 87.  1998. Weak comparability of values as a foundation for ecological economics. Ecol. Econ. 26:3277–86 [Google Scholar]
  88. Norton B. 88.  1987. Why Preserve Natural Variety? Princeton, NJ: Princeton Univ. Press
  89. Rolston H III. 89.  1988. Environmental Ethics: Duties to and Values in the Natural World Philadelphia, PA: Temple Univ. Press
  90. Anthoff D, Hepburn C, Tol RSJ. 90.  2009. Equity weighting and the marginal damage costs of climate change. Ecol. Econ 68:836–49 [Google Scholar]
  91. Azar C, Sterner T. 91.  1996. Discounting and distributional considerations in the context of global warming. Ecol. Econ 19:2169–84 [Google Scholar]
  92. Rawls J. 92.  1971. A Theory of Justice Cambridge, MA: Harvard Univ. Press
  93. Piketty T. 93.  2014. Capital in the Twenty-First Century Cambridge, MA: Harvard Univ. Press
  94. Stiglitz J. 94.  2013. The Price of Inequality: How Today's Divided Society Endangers Our Future New York: Norton
  95. Sen A. 95.  1999. Commodities and Capabilities New York: Oxford Univ. Press, 2nd ed..
  96. Polasky S, Carpenter SR, Folke C, Keeler B. 96.  2011. Decision-making under great uncertainty: environmental management in an era of global change. Trends Ecol. Evol 26:8398–404 [Google Scholar]
  97. Lenton TM, Held H, Kriegler E, Hall JW, Lucht W. 97.  et al. 2008. Tipping elements in the Earth's climate system. PNAS 105:61786–93 [Google Scholar]
  98. Scheffer M, Carpenter SR, Foley JA, Folke C, Walker BH. 98.  2001. Catastrophic shifts in ecosystems. Nature 413:591–96 [Google Scholar]
  99. Sarukhan J, Koleff P, Carabias J, Soberon J, Dirzo R. 99.  et al. 2010. Natural Capital of Mexico. Synopsis: Current Knowledge, Evaluation, and Prospects for Sustainability Mexico City, Mex.: Natl. Comm. Knowl. Use Biodivers.
  100. Ouyang Z, Wang Q, Zheng H, Zhang F, Peng H. 100.  2014. National ecosystem survey and assessment of China (2000–2010). Bull. Chin. Acad. Sci. 29:462–66. (in Chinese) [Google Scholar]
  101. Belli P, Anderson JR, Barnum HN, Dixon JA, Tan J-P. 101.  2001. Economic Analysis of Investment Operations Washington, DC: World Bank Inst.
  102. 102. US Off. Manag. Budg. 1992. Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs. Circ. A-94 (Revis.) Washington, DC: White House
/content/journals/10.1146/annurev-environ-101813-013253
Loading
/content/journals/10.1146/annurev-environ-101813-013253
Loading

Data & Media loading...

  • Article Type: Review Article
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error