1. Chapter 16: Indicators of Development Sustainability
Beyond Economic Growth: An Introduction to Sustainable Development
By Tatyana P. Soubbotina

2. Overview of Chapter 16: Indicators of Development Sustainability
What is national wealth?
Physical capital plus human and natural capital
Does accumulation of national wealth indicate sustainable development?
The genuine savings rate adjusts the classical savings rate
What is a measure of global wealth/sustainability?
Social capital and corruption

3. What is national wealth?
Classical economics focuses on physical capital
Building physical capital is classified as “investment”
Everything else is classified as “consumption” including improvements in human capital or natural capital
National wealth is determined by physical, human, and natural capital
“Green” national accounts, for example, “Green GDP”, account for changes in natural and human capital
Developed countries have lower share of natural capital in their national wealth (Fig. 16.1)

4. Does accumulation of national wealth indicate sustainable development?
Sustainable development must allow physical, human, and natural capital to grow (or not to decline)
The “genuine savings rate” accounts for natural resource depletion & pollution, and growth in human capital (see Figure 16.2)
Major oil exporters may have negative genuine savings rates
The genuine savings rate does not capture limited substitutability between types of capital
Some physical capital (solar panels) can substitute for natural capital (oil). Is there a substitute for a coral reef?

5. What is a measure of global wealth/sustainability?
Material throughput determines the total stress that humans put on the environment
Sustainability limits this stress to tolerable levels
Consumption at the levels of high-income countries would require ten planets (!) like Earth
New technologies required to extend development to everyone

6. Social Capital and Corruption
Social capital (the way people interact, cooperate, and resolve conflicts) is critical for economies to grow
Corruption (bribery or misuse of public funds) is an important indicator of social capital degradation
Two important types of corruption
Administrative corruption: bribes to administrators to ignore laws or to win public contracts
State capture: bribes to lawmakers to create favorable laws
Corruption can be reduced by a reformed public administration, an independent judiciary, an independent media, and competitive markets