Revision: Green National Product

National income accounts have not, until recently, made any adjustment for the environmental impact of economic growth. Critics argue that because of this omission, the statistics misrepresent improvements in social welfare. For example, no allowance is made for environmental depletion or money spent on correcting environmental damage that is actually recorded as an addition to GDP. GDP only records marketed transactions - at present, there is no market for many important environmental resources and it is also difficult to place monetary values on them. Green accounting is starting to make progress in a number of countries.

One measure is the Index of Sustainable Economic Welfare (ISEW) developed by economists at the New Economics Foundation. The ISEW adjusts official data on real national output and makes an allowance for defensive spending (i.e. that incurred in cleaning up for pollution and other forms of environmental damage, together with money spent commuting to work). Not surprisingly, the net growth of ISEW is well below that of the official data for national income, output and spending.