The preeminent macroeconomic indicator is the growth rate of GDP. When gross production falls it entails unemployed people and idle factories, which has great political salience. But focusing on GDP growth alone can mask the extent to which future production and wellbeing may be undermined by short-sighted policy which consumes natural wealth, fails to repair depreciating assets such as roads and bridges, under-invests in R&D as well as the quality and quantity of education, and allows critical institutions, such as independent courts, to be subverted.
If we care about the future when making economic policy, then complementary measures of wealth creation and depreciation are required. Wealth is the sum of asset values and assets are objects – buildings, machines, natural resources, ideas, knowledge, institutions, financial instruments – which yield a stream of benefits into the future. For this reason, wealth and future wellbeing are inextricably linked, and indicators of net wealth creation are essential to underpin forward-looking economic policy.
Kirk Hamilton will present the general argument for macroeconomic indicators of net wealth creation, the economic theory which underpins this approach, and the policy implications which follow. He will draw upon his recent book with Cameron Hepburn National Wealth: What is missing, why it matters (2017), as well as the work of the World Bank on comprehensive wealth accounting, encapsulated in the series of books on the Changing Wealth of Nations and published measures of Adjusted Net Saving in the World Development Indicators.
Brief bio. In addition to his current visiting positions at Oxford and LSE, Kirk Hamilton is a consultant to the World Bank, where he led the economics team in the Environment Department for over 10 years. He is the initiator of the World Bank’s work on comprehensive wealth accounting and was a co-author of World Development Report 2010 Development and Climate Change. He was previously the Assistant Director of National Accounts for the government of Canada, and has a PhD in Resource and Environmental Economics from University College London.