On the Interpretation and Applicability of a "Green National Product."

Several economists have recently suggested that the national product should be adjusted for the value of environmental damages. In this paper we look at some of the difficulties one encounters when the correcting formulae derived from simple theoretical models are transferred to applied national accounting. In particular, the paper is concerned with the question of whether a corrected national income measure will actually provide relevant information for policymakers. It is shown that a 'green national product' will be very difficult to interpret. In general, it may not give any indications of the necessity of imposing stronger environmental policy actions. Nor does it indicate the hypothetical state of the economy after a change in environmental efforts. Copyright 1995 by The International Association for Research in Income and Wealth.