Chapter 3. Recent Genuine Saving Estimates

Chapter 4. The Importance of Investing Resource Rents: A Hartwick Rule Counterfactual

Chapter 5. The Importance of Population Dynamics: Changes in Wealth per Capita

Chapter 6. Testing Genuine Saving

Chapter 3


However sustainable development is defined,1 achieving it is, at heart, the process of maintaining wealth for future generations. Wealth is conceived broadly to include not only the traditional measures of capital, such as produced and human capital, but also natural assets. Natural capital comprises assets such as land, forests, and subsoil resources. All three types of capital—produced, human, and natural—are key inputs to sustaining economic growth. The standard national accounts measure the change in a country’s wealth by focusing solely on produced assets. A country’s provision for the future is measured by its gross national saving, which represents the total amount of produced output that is not consumed. Gross national saving, however, can say little about sustainable development, since assets depreciate over time. Net national saving equals gross national saving minus depreciation of fixed capital and is one step closer to measuring sustainability. The next step in measuring sustainability is to adjust net saving for the accumulation of other assets—human capital, the environment, and natural resources—that underpin development. This chapter introduces the concept of genuine saving (formally known as adjusted net saving) first derived in Pearce and Atkinson (1993) and Hamilton (1994). It then presents and discusses the empirical calculations of genuine saving rates available for over 140 countries (tabulated in appendix 3). Genuine saving provides a much broader indicator of sustainability by valuing changes in natural resources, environmental quality, and human capital, in addition to the traditional measure of changes in...