Lecture 10 Flashcards
Why is GDP criticised as a measure of a country’s success in development?
Higher GDP doesn’t represent an increase in welfare
Not proficient at indicating economic production
2 reforms for GNP that environmentalists want?
Adjusting GNP measure to include sustainable production
Replace GNP as a welfare indicator with an indicator made for this purpose
Why is GNP a poor indicator of welfare?
Because GNP doesn’t take into account capital levels - ie. No use having a high GNP if all the capital is run down
Net national product equation?
NNP = GDP - Dm
Where Dm = depreciation of man made capital
Doesn’t include natural capital!
Example of a country who has high GNP but V unsustainable?
Indonesia
High GNP growth in last 30yrs, done by running down NK (petrol, soil, forestry, tin etc) - if take into account 3 types of NK NNP is much lower
2 types of depreciation of NK?
Resource depletion:
Δ quantity of NK (given by Dn)
Environmental degradation:
Δ quality of NK (given by Degn)
Equation for green net national product?
Green NNP = GNP - Dm - Dn - Degn
2 issues with green NNP?
1) won’t necessarily encourage countries to spend on maintaining environmental quality
2) if growth of GNP is greater than growth of NK depreciation then green NNP may still rise
What is the sustainability test?
A country must save (S) at least as much as sum of depreciation of all capital
S >= Dm + Dn + Degn
Net savings = ?
S - Dm
Adjusted net savings = ?
S - Dm - (Dn + Degn)
Why is GNP not a good indicator of welfare?
welfare is also dependent on; employment, working conditions, income distribution etc.
What does the Measure of Economic Welfare include (MEW)?
Personal consumption, leisure, non market work etc
What does the Index of Economic Aspects of Welfare include?
Similar to MEW except also includes environmental factors eg. Resources depletion and private pollution control costs
4 main measures of environmental factors (physical)?
GG emissions
Wildlife indices
Water use
Natural resource use
