Should GNP include environmental costs/benefits?
Should there be separate system of accounts for natural resources?
Is there a problem measuring social welfare with a single figure?

The people who put together the United Nations' system of national accounts, based on GNP, have decided that there should not be any major changes to them. Rather, they suggest that a separate system of satellite accounts should be worked out that would give measures of natural resources; and that, at some time in the distant future, these might be incorporated into the main GNP figures. This reluctance to change the system is frustrating for many environmentalists. Robyn Eckersley points out that:

Such a move would provide the public with a clearer picture of the nature and quality of our economic activity and thus effectively serve as a massive public education campaign on the costs of our present pattern of growth; it would help to counter the inaccurate and politically damaging accusations that Greens are 'anti-development', 'anti-growth' and unconcerned with employment issues; and it would provide a more meaningful yardstick by which to develop ecologically sound macro-economic policies that would foster a genuine improvement in our social and environmental well-being. (1992, p. 129).

Some people dispute the value of a single figure that is supposed to be an index for a nation's well-being. Why not, they ask, have several indicators; some expressed in monetary terms, some in quantities, and some that are more qualitative? They argue that a single figure lumps together so many variables that it is unlikely to be able either to provide much information about any of those variables or be sensitive to what is really going on in the nation. The use of one figure also assumes that natural resources and human capital are interchangeable and one can be substituted for the other. This is not an acceptable assumption for many environmentalists.

The Australian Government argues against valuing natural assets and including their measurement in the national accounts for more pragmatic reasons. It says it is too difficult in the short-to-medium term. Instead, it argues that it 'would help the conventional National Accounts to measure more accurately the total level of activity, including that relating to the use and consumption of natural resources' (1990, p. 18) if market prices for goods better reflected environmental values. The incorporation of environmental values in the price of goods will be discussed further in chapter 8; but it is worth noting here that, if prices increase to incorporate environmental costs, and environmental costs are not subtracted from the final selling price when working out GNP, this could have the effect of inflating GNP rather than deflating it.

Norway, Canada and France have instituted systems of extensive resource accounts which are separate but supplementary to their national economic accounts. These are physical measures of the country's natural resources such as forests, fish and minerals. Keeping account of natural resources raises problems in itself. Should resource accounts be kept in monetary terms, so that they can be directly integrated into economic decisions? This is easier for minerals and resources that have a market value, but not so easy for non-commercial wild species, for example.

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Source: Sharon Beder, The Nature of Sustainable Development, 2nd edition, Scribe, Newham, Vic.,1996.

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