NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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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