Wealth, Illth, And Net Welfare

Daly, Herman
http://www.countercurrents.org/daly151111.htm

Publisher:  Countercurrents
Date Written:  15/11/2011
Year Published:  2011  
Resource Type:  Article
Cx Number:  CX13883

Wellbeing should be counted in net terms -- that is to say we should consider not only the accumulated stock of wealth but also that of "illth;" and not only the annual flow of goods but also that of "bads." The fact that we have to stretch English usage to find words like illth and bads with which to name the negative consequences of production that should be subtracted from the positive consequences, is indicative of our having ignored the realities for which these words are the necessary names.

Abstract: 
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Wellbeing should be counted in net terms -- that is to say we should consider not only the accumulated stock of wealth but also that of "illth;" and not only the annual flow of goods but also that of "bads." The fact that we have to stretch English usage to find words like illth and bads with which to name the negative consequences of production that should be subtracted from the positive consequences, is indicative of our having ignored the realities for which these words are the necessary names.

Bads and illth consist of things like nuclear wastes, the dead zone in the Gulf of Mexico, biodiversity loss, climate change from excess carbon in the atmosphere, depleted mines, eroded topsoil, dry wells, exhausting and dangerous labor, congestion, etc.
...

our national accounting measures only “economic activity.” Activity is not separated into costs and benefits. Everything is added in GDP, nothing subtracted. The reason that bads and illth, inevitable joint products with goods and wealth, are not counted, even when no longer negligible in the full world, is that obviously no one wants to buy them, so there is no market for them, and hence no price by which to value them. But it is worse -- these bads are real and people are very willing to buy the anti-bads that protect them from the bads. For example, pollution is an unpriced, uncounted bad, but pollution clean-up is an anti-bad which is accounted as a good. Pollution cleanup has a price and we willingly pay it up to a point and add it to GDP — but without having subtracted the negative value of the pollution itself that made the clean up necessary. Such asymmetric accounting hides more than it reveals.

In addition to asymmetric accounting of anti-bads, we count natural capital depletion as if it were income, further misleading ourselves. If we cut down all the trees this year, catch all the fish, burn all the oil and coal, etc., then GDP counts all that as this year’s income. But true income is defined as the maximum that a community can consume this year, and still produce and consume the same amount next year — maximum production while maintaining intact future capacity to produce (capital in the broadest sense). Nor is it only depletion of natural capital that is falsely counted as income — failure to maintain and replace depreciation of man-made capital, such as roads and bridges, has the same effect. Much of what we count in GDP is capital consumption and anti-bads.
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As argued above, one reason that growth may be uneconomic is that we discover that its neglected costs are greater than we thought. Another reason is that we discover that the extra benefits of growth are less than we thought.

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