National Wealth

national accounts are descriptors. they describe the state of an economy and form the raw material for both assessing its performance and prescribing policy. national accounts embody information essential for economic evaluation. the framework for national accounts currently in use throughout the world, however, suffers from extreme narrowness. vast quantities of information relevant for economic evaluation do not appear in them. Some don’t because the appropriate data are difficult, even impossible, to collect; but others don’t because the theory and practice of economic evaluation haven’t asked for them. the widespread demand for “green” national accounts has arisen in recent years because of a growing recognition that contemporary national accounts are an unsatisfactory basis for economic evaluation. the qualifier green signals that we should be especially concerned about the absence of information on society’s use of the natural environment. in recent years collaboration among a few economists has given rise to a comprehensive theory of national accounts based on primary normative principles. attempts have also been made by these authors to put the theory to work on international data. in this essay i review that theory in a non-technical manner and illustrate it with data from india. the theory i am reviewing here takes as its starting point the view that the ultimate purpose of economic evaluation is the protection and promotion of human well-being across the generations. it instructs governments and international agencies to go beyond even green national accounts by reclassifying certain classes of goods and services and adding others that are currently missing. the theory goes on to show that the objective of economic evaluation should be a comprehensive notion of wealth (adjusted for population and the distribution of wealth in the economy), not gross domestic product (GdP) nor the many other ad hoc indicators of human well-being that have been advanced in recent years, such as the united nations’ Human Development Index.