Page 28 - Special Topic Session (STS) - Volume 2
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STS452 Joerg B.
machinery, transport equipment), and human capital (education, skills,
knowledge) is growing if a nation’s adjusted net savings are positive.
There is an intrinsic link between change in the wealth of a nation and the
sustainability of its development path. If genuine (adjusted) savings are
negative at a given point in time, then welfare in the future will be less than
current welfare. Therefore, adjusted net savings can be regarded as a
sustainability indicator.
The World Bank calculates adjusted net national savings as follows:
Gross national savings
− Consumption of fixed capital
= Net savings
+ Education expenditure
− Energy depletion
− Mineral depletion
− Net forest depletion
− Carbon dioxide emissions damage
− Particulate emissions damage
= Adjusted net savings (genuine savings)
The calculation of adjusted net national savings begins with gross national
savings, calculated as gross national income minus total consumption plus net
transfers from abroad. Deducting consumption of fixed capital from gross
national savings, we arrive at net national savings. Finally, education
expenditure (considered as investment into human capital) is added, and
depletion of natural resources and damage from pollution are deducted.
The World Bank adds all current operating expenditures for education to
net savings as a gross investment in human capital. I believe that it would also
be appropriate to deduct the consumption of human capital, as is done for
the consumption of physical capital. Consumption of fixed capital reflects the
value of the retired physical capital. The pensions of persons who worked in
the education system could be regarded as consumption of human capital. In
this case, consumption of human capital corresponds to the costs for the
retirements of personal in education.
An economy is sustainable if it saves more than the depreciation on its
man-made and natural capital—in other words, if its net national savings
measurement is positive.
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