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The water and diamond paradox and green NNP as a welfare indicator
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
2014 (English)In: Environmental Economics, ISSN 1998-6041, E-ISSN 1998-605X, Vol. 5, no 2, 48-54 p.Article in journal (Refereed) Published
Abstract [en]

A classical structure that is used to analyze the water and diamond paradox provides an intuitive underpinning to the modern theory of welfare measurement in a growth context. John Law’s and Adam Smith’s concepts of value-in-use and value-in-exchange have modern aggregated counterparts. Complemented with Dupuit’s extension in terms of a utility function with a declining marginal utility, they are close to enough to provide the intuition behind important aspects of modern dynamic welfare measurement. We answer four modern questions: (1) Will an increase in the level of NNP indicate a welfare improvement? (3) Will NNP growth indicate a local welfare improvement? (3) If the answers to (1), (2) are no, what are the underlying reasons? (4) How do the correct welfare indicators look like? At least Dupuit, as an inventor of the consumer surplus, may perhaps have agreed with some of the answers to the modern dynamic approach.

Place, publisher, year, edition, pages
2014. Vol. 5, no 2, 48-54 p.
Keyword [en]
the water and diamond paradox, green NNP, welfare measurement
National Category
URN: urn:nbn:se:umu:diva-124773OAI: diva2:955007
Available from: 2016-08-24 Created: 2016-08-24 Last updated: 2016-08-29Bibliographically approved

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Löfgren, Karl-Gustaf
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