A recent study tests Inclusive Wealth as a measure for sustainability, through a field study in Victoria, Australia. Although it fails to include several important factors, it can still provide a meaningful policy constraint. Photo: A. Maslennikov/Azote

Inclusive wealth

A fitting measure of sustainability?

New study tests Inclusive Wealth as a measure of sustainability

Over the past few years it has become increasingly acknowledged that measurements such as gross domestic product (GDP) and the human development index (HDI) do not adequately capture the wealth of a country. They also leave a lot to be desired when thinking about long-term sustainability.

For example, if Brazil were to cut down the entire Amazon rainforest, their GDP would likely skyrocket that year. But the consequences, both for the environment and the long-term economy would be disastrous.

Dumping the step-sisters
As of last year, Inclusive Wealth (IW) has been adopted by the United Nations as a potential measure for long-term sustainability.

IW attempts to measure the productive base that generates the standard of living in society, and includes the value of produced, human and natural capital. Produced capital can be infrastructure and machines, and human and natural capital are the resources found in people and in nature.

If IW falls over time society is consuming its capital, and risks future impoverishment. Sustainability then, is when IW stays the same or increases.

Try it out for size
A recent publication in Sustainability: Science, Practice & Policy, presents the concept of Inclusive Wealth (IW) and tests the measurement of IW at a regional scale in the Goulburn-Broken Catchment in Victoria, Australia. The catchment area is one of the country’s most important sites for food production, and a place where nature conservation is highly valued.

"A difficulty in measuring sustainable development is integrating measures of the key components of sustainability, the environmental, social and economic, in a way that allows for comparisons and assessments of trade-offs" says centre researcher Oonsie Biggs, co-author of the article.

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In their trial model the authors address practical issues associated with identifying capital stocks, estimating shadow prices, addressing risk, assessing intra-generational equity and dealing with price changes over time.

Cinderella in the making
The authors conclude that IW can be a meaningful measure of sustainability. However, there are a few theoretical constraints.

IW is an economic framework, and should not be relied on exclusively as a sustainability indicator. For example it fails to include the importance of equity, justice and freedom.

But at any given scale, it can still provide a meaningful policy constraint when considering development options. It can be applied on multiple scales and used to assess trade-offs between alternative development or management options.

"While precise, universally acceptable estimates of Inclusive Wealth are impossible in practice, we nevertheless believe that it is a valuable addition to the policy-making toolkit as it does more than assess the costs and benefits of policy options – it assesses their sustainability. We can only wonder what decisions could have been made over the last 30 years if policy makers had been able to test the sustainability of different proposals" concludes Brian Walker, senior research fellow at Stockholm Resilience Centre and co-author of the paper.

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Published: 2013-04-26


L.J. Pearson, R. Biggs, M. Harris, B. Walker. 2013. Measuring sustainable development: the promise and difficulties of implementing Inclusive Wealth in the Goulburn-Broken Catchment, Australia. Sustainability: Science, Practice, & Policy 9(1): 16-27

Oonsie Biggs studies practical scientific theory, methods and insights that can improve society's ability to anticipate high-impact tipping points, and build resilience to undesirable changes.


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