Economic growth, national income and the blocked choices for the environment

Abstract

This paper explains why the identification of the increase of national income (or GNP) with economic growth, increase in welfare and economic success is theoretically wrong. This incorrect use of terms strengthens the one-sided orientation of economic policy on the growth of production, often at the expense of the environment. Two examples are given of how this course of affairs is blocking the social choices regarding a fundamental solution of the environmental problem. An overview is given of the possibilities of correcting the Gross National Product (GNP) figures for environmental losses. None of these are perfect, since shadow prices for environmental functions directly comparable with the market prices of goods produced can be construed only in exceptional cases. The conclusion is that the only way to arrive at national income figures corrected for environmental losses is to supplement the corrections for expenditures on preventive, restoratory and compensatory measures (“defensive expenditures”) with the estimated expenditures on measures required to meet physical standards, based on health and a sustainable economic development.