Linking Economic Theory with Sustainable Development and Well-Being Indicators
For sustainable development to be meaningful, it must be achievable and measurable by some reasonably clear metric or metrics. Economists have long recognised that the System of National Accounting aggregates fail to properly measure human well-being. Complements and perhaps alternatives to indicators such as Gross National Income are required. However, the development of sustainability indicators has generally lacked theoretical rigour leading to an incoherent framework for assessment. Arguably, the most consistent approach to the issue is the “capital approach” derived from neoclassical economic theory and expanded with concepts from the natural sciences. The capital approach conceptualises a sustainable development path as one where an economy is capable of providing non-declining human well-being to its citizens through time. Well-being ultimately depends on maintaining the broadly defined stock of capital resources (including natural resources) and technological advancement, together referred to as comprehensive national wealth. To operationalise the capital approach, measures of the changes in comprehensive national wealth – Genuine Savings (GS) – are required. The research provides a methodology to construct Irish GS from national data sources and by using guidance from the updated public spending code and United Nations System of Environmental-Economic Accounting framework.