The inclusive wealth index. A critical appraisal

Philippe Roman and Geraldine Thiry

Ecological Economics, 2016, vol. 124, issue C, 185-192

Abstract: Among recent high-profile propositions to revise national accounts and to provide new indicators of sustainability and well-being, the inclusive wealth framework and the related inclusive wealth index (IWI) undoubtedly stand out as one of the most promising endeavours. Built up at the confluence of welfare, development and sustainability economics, the indicator has been designed to bring information about the wealth of nations and their sustainability, in a comprehensive way. The inclusive wealth framework is nevertheless fraught with limitations, due to questionable theoretical assumptions, gaps in data availability, unrealistic assumptions about the future and inability to account for distributional issues. We propose a non-exhaustive critical appraisal of the index and its underlying framework. We conclude that these limitations undermine its capacity to fulfil the requirements of a satisfactory sustainability indicator. We argue that most problems lie in the substantial discrepancy between the inclusive ambition of the indicator and the scarce means to implement it. Whereas the interconnectedness of the various assets that constitute wealth as well as their complex evolution through time are acknowledged by the proponents of inclusive wealth, the way the IWI is computed is rather a mere addition of layers of actuarial-like monetary values for a (not inclusive yet) range of capital assets. Caution is thus warranted while using such an approach, and shorter-range alternatives to pursue similar goals are proposed.

Keywords: Inclusive wealth; Sustainability; Well-being; Indicators; Green accounting (search for similar items in EconPapers)
JEL-codes: B41 C18 D63 E21 Q01 Q56 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:124:y:2016:i:c:p:185-192

DOI: 10.1016/j.ecolecon.2015.12.008

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