Social Costs of the Economic Process and National Accounts: The Example of Defensive Expenditures

The starting point of the paper is the finding that the Gross National Product (GNP) entails in growing proportions, economic activities that are not real benefits of the economic process, but in fact, incremental costs of production and consumption. The paper examines the empirical evidence for the thesis that the proportion of defensive or compensatory expenditures of the GNP, that only reduce, neutralize, repair the negative effects of the economic growth process, increases over time. The research results give evidence to this fact for the Federal Republic of Germany. The ratio of defensive expenditures in the GNP between 1970 and 1985 increased from 5% to at least 10%.