Developing inclusive measures of the wealth of nations

Credit: Aaron Burden/Unsplash

A global movement that looks beyond gross domestic product (GDP) to determine how an economy can prosper sustainably without sacrificing the natural environment or the future health and wellbeing of its people is being led by research by Partha Dasgupta, Diane Coyle, Matthew Agarwala and the Wealth Economy team at Cambridge.

Growth in GDP has been the overarching goal of economic policy for over 70 years but, while material gains have been substantial, they have been accompanied by unprecedented environmental and social change, the consequences of which threaten to wipe out a century of gains.

The research in Cambridge provides a pathway for local and national governments, and international institutions, to move beyond GDP and adopt new frameworks that emphasise a society’s wealth and wellbeing (rather than its income) and to develop new measures that account for ‘missing’ capital stocks, in particular natural and social capital.

Their Inclusive Wealth Framework, developed by Dasgupta in the early 2000s, provides the theoretical foundation for the practical calculation of sustainable development indicators seen in the United Nations’ (UN’s) Inclusive Wealth reports of 2012, 2014 and 2018.

It also underpins India’s Green National Accounts (2018 onwards) that seek to reshape government decision-making for a ‘better environment, better tomorrow’.

Their research has enabled the UN statistics division to account for changes in ecosystems such as air purification, with a direct effect on human health. Their social capital metric supports the UK’s Industrial Strategy Council in evaluating how policy and economic change affect public trust.

The Wealth Economy: Natural and Social Capital

“Combined, the works of Professor Dasgupta, Professor Coyle, and Dr Agarwala provide the economic rationale for moving Beyond GDP. Their work has highlighted the need for balanced investment in all components of wealth – natural, human, physical, and social capital – and crucially, the interdependencies between them.”

– Chief Environmental Economist, Ecosystems Division, United Nations Environment Programme