1. 1 Measuring Sustainable Development: Wealth and Adjusted Net Savings Glenn-Marie Lange Environment Department The World Bank

2. Wealth & Savings Substantial theoretical literature has shown that – economic well-being depends on wealth – sustainable development depends on maintaining per capita wealth So, we want to monitor wealth and changes in wealth, adjusted net savings (Genuine Savings)

3. Estimating wealth, four steps (1) Total capital (2) Produced capital (3) Natural capital (4) = (1)-(2)- (3) Intangible capital Method usedPresent Value of consumption Perpetual Inventory Method Present Value of rents cost Difference Assets included By definition, all assets that contribute to national consumption Machinery, equipment and infrastructure Urban land Sub-soil assets resources (timber and non-timber) Crop and pasture land Protected areas Human capital Governance Institutional effectiveness All other assets not measured in column (2) and (3)

4. 4 Testing genuine saving Theory suggests that positive genuine saving today should lead to growth in consumption in the future Ferreira and Vincent (2005) and Ferreira, Hamilton and Vincent (2008) test this using the World Bank’s 30 year time series of saving estimates For developing countries the relationship holds, but not for rich countries (where innovation and technology are arguably the engine of growth) Further testing would benefit from improved accounts

5. Issues and research priorities for future work Conceptual issues Data improvement Promoting use of wealth & savings accounts 5

6. Issues addressed in the forthcoming report, The Changing Wealth of Nations Conceptual issues –Intangible capital and understanding the residual –Alternatives to market exchange rates for international comparisons (PPP) –Capital gains and depletion of exhaustible resources Improving data for the wealth & saving accounts – Incorporating wealth accounts compiled by national statistical offices – Drawing on national research programs 6

7. 7 Issues for future work include: –Including ‘missing’ natural capital—certain minerals, fisheries, water –Identifying thresholds and non-linearities in the natural world –Valuing biodiversity –Inventorying and valuing environmental services –Estimating elasticities of substitution for resources

8. Promoting use of wealth accounting The Changing Wealth of Nations will promote partnerships with World Bank units, especially operational units – Macroeconomics – Management of rents from minerals, EITI++ – Use by country and regional units We are looking for partnerships outside—possibly UNEP, the World Wealth Report, 1 st meeting in January 2010