ABSTRACT
First, we have a natural desire to understand broad trends that affect our society and its welfare. Indeed, it is for this reason that we first began to collect many of our national economic statistics, including the familiar measures of gross domestic product (GDP) and inflation. Yet from the origins of GDP accounting, in A.C. Pigou’s seminal Wealth and Welfare (1912), it was acknowledged that GDP is only a proxy and not a perfect measure of welfare because it omits many important components that do not pass through markets. Even then, the environment was acknowledged to be one of the important omissions. Since that time, we have invested enormous resources in improving measures of the market components of national well-being, but we have not proportionately broadened that effort to other components, like the environment. It is time to do so.
