- Report advises a switch from a focus on GDP to 'wealth accounting' 
- Preliminary research shows multiple perspectives needed for effective carbon 
accounting 
- Initial findings show stronger economies require higher levels of social trust

As the consequences of climate change, social tensions and high levels of 
inequality are increasingly evident, the Bennett Institute for Public Policy at 
the University of Cambridge, led by Professor Diane Coyle, has published an 
initial report on how to improve economic measurement in order to guide 
effective economic policymaking.

The report recommends focusing on an alternative measurement framework based on 
the "wealth economy" rather than just GDP: wealth is determined by the access 
to a range of economic assets people need to fulfil their economic potential 
and the long-term capacity of the economy to deliver sustainable growth and 
improving living standards.

The forward-looking element of this new economic framework makes it a better 
indicator of sustainability in terms of the economy and society as well as the 
natural environment than annual output or GDP.

This ambitious framework requires measurement of access to six types of 
economic assets that add up to what is known as comprehensive wealth of the 
nation.

1. Physical assets and produced capital, including access to infrastructure and 
to new technologies 
2. Net financial capital 
3. Natural capital, the resources and services provided by nature 
4. Intangible assets such as intellectual property and data 
5. Human capital, the accumulated skills and the physical and mental health of 
individuals 
6. Social and institutional capital

Commenting on the report, Professor Diane Coyle said: "21st century progress 
cannot be measured with 20th century statistics. We chose to focus on the 
wealth economy as a guide to whether or not there is any increase in prosperity 
because it measures the long-term capacity of an economy to deliver sustained 
growth and improved living standards. Without measuring changes in these assets 
there is little prospect of delivering sustainability, in terms of the economy 
and society as well as the natural environment."
The Cambridge researchers have started with a focus on natural and social 
capital, as the first steps to developing a comprehensive framework.

Natural capital, which provides the building blocks of all the other forms of 
capital, is generally in decline.  This poses grave risks for wellbeing. GDP 
growth derived from depleting natural capital, which includes water, air, soil, 
minerals and renewable capital such as forests or marine ecosystems which are 
prone to collapse, deprives future generations of wellbeing, which is why it is 
important to measure natural capital.

Covering a first set of research results, the report provides an initial view 
of the direction of the research, with early indications of findings, including 
how we could better report on carbon emissions.

Mathew Agarwala, research leader on the project, comments: "Carbon emissions 
degrade natural capital. This new wealth economy approach forces us to think 
about adjusting national balance sheets according to the impacts of climate 
change, alongside contributions to it. Preliminary results indicate that 
constructing accounts from multiple perspectives – each attributing emissions 
to a different point on the global supply chain – is the only way to have a 
comprehensive understanding of the carbon footprints of nations."

Social capital is often referred to as the glue that holds societies together. 
It encompasses personal relationships, civic engagements and social networks. 
Without it there can be little or no economic growth. The report argues that 
trust in fellow citizens and institutions as well as the quality of governance 
are the result and the cause of productivity growth and higher reported 
wellbeing.
As a fundamental element of social capital, the formation of trust relies on 
cumulative experiences of trustworthy interactions with other people or 
organisations or broader social settings such as shared ethical views, cultural 
norms and rules.

The research team have performed statistical analyses on European data 
exploring trust in societies and how this correlates with economies. This 
showed that overall, trust is highest for people in Scandinavia and lowest for 
those in Mediterranean and Eastern countries, that it generally increases with 
income, and that building trust may help boost productivity.

The Wealth Economy project seeks to ultimately augment GDP with a small 
dashboard recording access to key assets and have been working with many of the 
biggest environmental economic initiatives from the United Kingdom to the 
United Nations.

Dimitri Zenghelis, Wealth Economy project leader, said: "Statistics are the 
lens through which we observe the economy: policymakers, businesses and 
individuals change their behaviour in response to the picture they see through 
that lens. Our statistical tools need to be fit for capturing value in an 
uncertain and rapidly changing world where decisions today will lock in our 
ability to prosper in the future."

The Wealth Economy project is supported by LetterOne.

The report has been written by:

Diane Coyle – Bennett Professor of Public Policy, University of Cambridge
Dimitri Zenghelis – Project Leader 
Matthew Agarwala – Research Leader
Marco Felici – Research Assistant
Julia Wdowin – Research Assistant
Saite Lu – Research Assistant

For more information and interviews, please contact:

Michael Bodansky
michael.bodansky@freuds.com 
+44(0)203-003-6544 / +44(0)7766-341-736

PDF: 
https://mma.prnewswire.com/media/956353/Measuring_wealth_delivering_prosperity.pdf

Logo: 
https://mma.prnewswire.com/media/956344/Cambridge_research_project_Logo.jpg


Source: Cambridge research project