Sustainability and the Measurement of Wealth

The last two decades have witnessed growing concern that the pattern of economic growth in many countries is not sustainable because of the depletion in stocks of many natural resources and the deterioration in the quality of various environmental services. These concerns have helped spawn a growing literature on 'sustainable development.' This emerging literature expands traditional growth-accounting approaches by giving considerable attention to natural resource stocks and environmental quality. This paper aims to advance this literature. We extend earlier work by offering a fully consistent theoretical framework that offers a clear criterion for sustainable development. This framework yields an empirically implementable measure of whether a given national economy is following a sustainable path. We apply this framework to five countries that differ significantly in terms of their stages of development and resource bases: the United States, China, Brazil, India, and Venezuela.