Why and How Should We Account for the Environment?

As a guide to economic policy many countries nowadays have a system of national accounts. The basic system was developed in the post World War II period, and was the outcome of a truly international effort. Involving the United Nations and other international organizations, it has been very successful in developing an international bookkeeping system, nowadays accepted and introduced by all developed and many developing countries. National accounts basically are compiled because policy-makers wish to have an overview of the economic performance of their country. The most well-known indicator for this is Gross Domestic Product. Other important indicators are those for industrial production, investments, consumption and the trade figures. Basically we are dealing with a system where the quantity of goods is measured in physical units valued at market prices. The rise in public sector administration has complicated matters, because of missing market prices. However, here good approximations have been developed. A fundamental problem arose when the wish originated to include nature into this accounting system. The idea was quite clear, i.e. to lend support to policy making when natural functions are included and/or affected. However, a problem that did not go away wa