Some Theoretical Connections Among Wealth, Income, Sustainability, and Accounting

Martin L. Weitzman

NBER Working Paper No. 22060
Issued in March 2016
NBER Program(s):Environment and Energy Economics

In theory, and under some quite strong assumptions, there exists an important rigorous quantitative relationship among the following four fundamental economic concepts: (1) "wealth"; (2) "income"; (3) "sustainability"; (4) "accounting". These four basic concepts are placed in quotation marks here because a necessary first step will be to carefully and rigorously define what exactly is meant by each concept. In this paper, I review what is known about this important four-fold quantitative relationship in an ultra-simplified setting. I identify some basic applications of this simplified economic theory of wealth and income (and sustainability and accounting). While the contents of this paper are expressed at a very high level of abstraction and require some restrictive assumptions, I believe that the fundamental four-fold relationship it sharply highlights is useful for understanding, at least in principle, what is "wealth" and what is its theoretical relationship to "income," "sustainability," and "accounting."

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Document Object Identifier (DOI): 10.3386/w22060

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