Working Paper: NBER ID: w22060
Authors: Martin L. Weitzman
Abstract: In theory, and under some quite strong assumptions, there exists an important rigorous quantitative relationship among the following four fundamental economic concepts: (1) "wealth"; (2) "income"; (3) "sustainability"; (4) "accounting". These four basic concepts are placed in quotation marks here because a necessary first step will be to carefully and rigorously define what exactly is meant by each concept. In this paper, I review what is known about this important four-fold quantitative relationship in an ultra-simplified setting. I identify some basic applications of this simplified economic theory of wealth and income (and sustainability and accounting). While the contents of this paper are expressed at a very high level of abstraction and require some restrictive assumptions, I believe that the fundamental four-fold relationship it sharply highlights is useful for understanding, at least in principle, what is "wealth" and what is its theoretical relationship to "income," "sustainability," and "accounting."
Keywords: No keywords provided
JEL Codes: Q01; Q2; Q5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Wealth (W) (D31) | Income (Y) (E25) |
| Future Income (Y) (J17) | Wealth (W) (D31) |
| Comprehensive Income (CI) (G29) | Sustainability (S) (Q01) |
| Comprehensive Accounting (M41) | Measurement of Wealth (W) (E21) |
| Comprehensive Accounting (M41) | Measurement of Income (Y) (E25) |
| Comprehensive Income (CI) (G29) | Wealth (W) (D31) |
| Higher Comprehensive Income (CI) (G39) | Greater Wealth (W) (D69) |
| Higher Comprehensive Income (CI) (G39) | Greater Sustainability (S) (Q01) |