Measuring Sustainability - UK wealth accounts for 25 years

Abstract

What is sustainability and how do we measure it? Sustainability could be achieved through sustainable development and much of the literature on sustainable development has taken human well-being to be the object to be sustained. By constructing a very large and extensive National Accounts consistent database, this study develops an original set of UK wealth accounts for 25 years – 1988 to 2012 – to measure UK sustainability. While doing so, this research calculates the monetary value of UK natural capital and human capital which is then added into produced capital to develop a first comprehensive wealth account for the UK. This thesis argues that both wealth accounting approaches - "top-down" and "bottom-up" - are conceptually the same. They only differ empirically because of the methodologies employed to calculate natural capital, human capital and total wealth. This thesis shows how these both approaches can be combined together to measure UK sustainability.

This study concludes that since 2007 UK is not on a sustainable path. Despite a positive genuine savings, since 2007 UK wealth has a negative growth rate and wealth per capita is in decline. A positive genuine savings with a fall in wealth per capita shows that UK savings has not been sufficient to compensate for a fall in wealth and population growth. In order to reverse the trend, either UK has to reduce its population growth or it needs to reinvest in its capital asset bases. This thesis argues that an increase in population does not always decrease per capita wealth because an increase in population driven by a skilled work force increases the value of human capital and thus total wealth. This increase in wealth could offset an increase in population keeping per capita wealth intact. Furthermore, for UK, which is not a resource rich country, investment in human capital is needed to increase the rate of wealth growth.