ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Measuring Well-being and Accounting Prices of Environmental Resources

Along the non-optimal sustainable developmental paths of the economy, the choice between benefitbased or cost-based accounting prices for measuring wealth assumes importance from the point of empirical feasibility and tractability. In the context of depletion of environmental resource stocks in the development process, compensatory afforestation of one hectare of forestland or reduction of a tonne of particulate matter emission at margin could be regarded as marginal investment projects. The account price of the resource could be either the present value of costs or the present value of benefits of this marginal investment project. The presence of irreversibility in resource use could be a problem in using cost-based accounting prices. Therefore, an empirically feasible method of measuring wealth of a nation could be to use the cost-based ccounting price in general and the benefit-based measure in the special cases where irreversibility is present.

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