Abstract
Published by the World Bank (as “Adjusted Net Savings”) for around 160 countries, Genuine Savings (GS) presents the most respected but also the most debated indicator for “weak” sustainability. It originates from the so-called “Hartwick rule” for the re-investment of rents from the depletion of natural in reproducible forms of capital. Coming from the theoretical reasoning behind GS, this paper discusses possible extensions either not yet discussed or underrepresented in current research. Mainly, I suggest a discussion of additional items that could be included in GS and show that both the global average and individual country levels of GS would change immensely by including these recommendations.
Highlights
This paper has two goals: first to provide an overview of the growing literature on Genuine Savings (GS) and its development, as it is the most important indicator for “weak” sustainability; second to critically discuss this indicator and suggest possible modifications
This is rooted in the idea that—population given—it is the sum of total capital, and not its single components, that is most decisive for production capacities and the basis for future development
Other indices for sustainable development, such as the Index for Sustainable Economic Welfare (ISEW), exclude investments in physical capital that are used for defensive expenditures such as household pollution abatement costs, as well as the cost of car accidents, underemployment, or crime [95]
Summary
This paper has two goals: first to provide an overview of the growing literature on Genuine Savings (GS) and its development, as it is the most important indicator for “weak” sustainability; second to critically discuss this indicator and suggest possible modifications. Hartwick [14] formulated a rule-of-thumb for a fair intergenerational handling of exhaustible resources: Keep the total capital stock of a country at least constant over time by “invest(ing) all profits or rents from exhaustible resources in reproducible capital such as machines”. This is rooted in the idea that—population given—it is the sum of total capital, and not its single components, that is most decisive for production capacities and the basis for future development The inclusion of air pollution is surveyed and discussed from the viewpoint of a whole line of literature that considers a broader base of pollution damages, as well as the critique that GS should not include pollution but concentrate on pure natural resource depletion
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