Accounting for unexpected capital gains on natural assets in net national product

Abstract

Failure to separate unexpected capital gains and losses on natural assets from depletion breaks the link between Net National Product (NNP) and sustainability. In addition, for resource rich countries this can lead to large spurious fluctuations in NNP, making it virtually useless for policy purposes. In contrast, when depletion is measured correctly, the link between NNP and sustainability is restored and there is no reason to expect NNP to be any more volatile than GNP. Oil data for Great Britain and Indonesia are used to illustrate the very significant impact that the treatment of capital gains and depletion can have on NNP. Show more