The Measurement of Wealth: Recessions, Sustainability and Inequality
This paper considers two central problems in our statistical frameworks which impair the ability to use wealth to assess economic sustainability or the impacts of economic downturns. Some increases in wealth may reflect increased economic rents—in particular, land and exploitation rents—and their capitalized value, unrelated to an increase in the productive capacity of the economy. Another major problem in our wealth accounts is the “missing capital” required to explain the marked decrease in economic output, at the time of the recession and in the years following, that cannot be fully accounted for by a decrease in measured inputs. When account is taken of this missing capital, the adverse effects of austerity appear much greater than suggested by the standard national income accounts.
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To be published in Contemporary Issues in Macroeconomics: Lessons from the Crisis and Beyond, International Economic Association Series, Joseph E. Stiglitz and Martin Guzman (eds.), Houndmills, UK and New York: Palgrave Macmillan. Paper presented at a special session of the International Economic Association World Congress, Dead Sea, Jordan, June, 2014 sponsored by the OECD.