Policy ForumEconomics

Boosting GDP growth by accounting for the environment

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Science  22 Aug 2014:
Vol. 345, Issue 6199, pp. 873-874
DOI: 10.1126/science.1253506

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Governments around the world use national income accounting to measure economic performance. However, it is widely recognized that indices that focus exclusively on market production, such as gross domestic product (GDP), are incomplete. National accounts could be extended to include many nonmarket services. This paper presents an analysis of how adjusting GDP to reflect the effects of air pollution would affect economic growth rates in the United States. Inclusion of monetized measures of environmental quality is a potentially important step in moving toward a measure that captures social welfare more accurately than GDP.