The problem of defining and measuring sustainable income

Abstract

The standard way to measure economic success is by measuring economic growth, as the sole goal of the economic policy based on the principles of neoclassical economics. Growth, together with the enlargement of the material base, is inevitable in order to increase employment and provide preconditions for development and technological advancement. Conventional indicators of the economic performance, such as a net national product, reflect consumption rather than sustainable income, as it determines the amount that can currently be used, without reducing the stock of capital. Conventional net national product or Hicks income will underestimate sustainable income in a model with explicit knowledge as a form of capital. When knowledge, not validated by the market, as a type of capital stock, is not included in capital accumulation accounts, sustainable income will vary even from the most accurately measured net national product.

Keywords

• income
• sustainable income
• hicksian income
• knowledge as a capital