Measuring for the Future, Not the Past

Mainstream economic statistics are a snapshot of the portion of the economy that falls inside the production boundary as defined in the System of National Accounts (SNA). This raises accounting challenges, given the economy’s reliance on largely unmeasured natural capital services. One issue is that the SNA records flow measures over the past. Augmenting them with full wealth accounts is a necessary extension for assessing the resilience of the economy. Wealth accounting, including natural capital, embeds sustainability through the valuation of asset stocks, which reflect anticipated future benefit flows; and wealth accounting, including the distribution of access to assets, better captures changes in social welfare. A corollary accounting challenge is that the present SNA framework is derived from backward-looking economic structures. At a time of substantial technological and behavioural transition, the dynamics of change imply there will be large discontinuous changes in the shadow prices needed for the valuation of natural capital services. In this paper we advocate a substantial expansion of natural capital measurement, including consideration of asset correlations and extended valuation techniques, to enhance mainstream economic indicators relating to risk, growth, and productivity. The task is fundamentally important because measurements change future behaviour and thus affect the outcomes they measure.