Measuring the Wealth of Nations

In this article, I review—and to an extent further develop—a normative theory that offers a unified language for both sustainability and policy analyses. The theory shows that by economic growth we should mean growth in wealth, which is the social worth of an economy’s entire stock of capital assets, not growth in GDP or improvements in the many ad hoc indicators of human development that have been proposed in recent years. Concurrently, the theory shows that by poverty we should mean a low level of wealth, not income, and that the distribution of well-being ought to be judged in terms of the distribution of wealth, not income or education or the many indicators that are currently in use. I show that the concept of wealth invites us to extend the notion of assets and the idea of investment well beyond conventional usage. This perspective has radical implications for the way that national accounts are prepared and interpreted. I then sketch a recent publication that has put the theory to work by studying the composition of wealth accumulation in contemporary India.