50-year Anniversary of "Is Growth Obsolete?" by William Nordhaus and James Tobin
On November 9 and 10, 2023, the Economic Growth Center, Tobin Center for Economic Policy, and Yale School of the Environment co-hosted the Yale Climate, Environment & Economic Growth Conference, bringing together researchers and practitioners to discuss the economic impacts and policy implications of climate and environmental change. Day 2 sessions marked the 50th anniversary of William Nordhaus and James Tobin’s seminal paper “Is Growth Obsolete?” and highlighted plans for Natural Capital Accounting that Yale economists have helped develop within the Biden Administration. Below we share key insights from the conference.
1. Natural Capital is having its day; the next step is better coordination.
Change is in the air when it comes to economic measurements for climate, nature, and the environment. The world is looking for a complement to GDP that links the environment and economic growth. Both in the international statistical and corporate space, natural capital accounting is gaining in importance and is becoming mainstream. But economic measurement of nature is still in its infancy, and there must be more coordination on measurements and definitions in sustainability.
“Delivering sustained economic growth remains a priority for most of the global population and requires maintaining productive capacity. To support this pursuit, economic statistics must shed light on the environment, inequality, and wellbeing. Priorities for action include greater integration of environmental and economic data across governments and between countries, better reflecting distributional trends, and closer collaboration between academics and national statisticians,’’ said Matthew Agarwala. who moderated a panel on how economic measurement needs to evolve to account for environment, climate, nature, and other public goods. Agarwala is Senior Policy Fellow at the Tobin Center and project leader at the Bennett Institute for Public Policy at the University of Cambridge.
2. Accounting for the natural environment is imperative for US global economic competitiveness.
This year, the US announced new natural capital accounts and environmental statistics, developed with the support of Eli Fenichel, Knobloch Family Professor of Natural Resources Economics at the Yale School of the Environment, while on leave at the White House Office of Science and Technology Policy. The Natural Capital Account will work with standard national accounting to measure the economic value that natural assets provide in society. This is vital to America’s economic competitiveness.
“At least for the last 50 years serious economists have thought it is important to account for use and degradation of the natural environment in measures of economic growth. Other countries are ahead of the US in incorporating changes in the environment into measures of economic growth. The US now has a robust plan to do so, and all of these needed to be done years ago. Making these adjustments is imperative for US global economic competitiveness, for our natural heritage, and for the world to come close to meeting Sustainable Development Goals (SDGs),” said Fenichel.
3. There is a burgeoning global movement to adopt and refine methodologies for valuing natural capital.
In the lead-up to the conference, the Tobin Center assembled significant policy and research commitments from partners across the world. These contributions reflect a global movement towards moving beyond gross domestic product and developing economic measurements that more accurately reflect environmental sustainability. The commitments include a variety of new policies and products from leading global environmental organizations, cutting-edge research that is charting a course to redefine economic success, and new funding to quantify climate change damages to natural capital. This movement not only reinforces the importance of incorporating natural capital in economic terms, but also signifies a shift towards more sustainable and inclusive economic policies. Collectively, these commitments represent a global shift towards recognizing that environmental health and economic growth go hand in hand to ensuring a sustainable future.
4. The US pioneered environmental and natural accounts, and is spearheading new initiatives to augment these accounts
In 1973, William Nordhaus and James Tobin’s seminal paper “Is Growth Obsolete” examined the linkage between the environment and economic growth and opportunities for including the environment in systems of economic measurement. The paper spurred 50 years of scholarship in national accounting and the environment, how measurements need to evolve, and the role of the environment in the future of economic growth.
Nordhaus, Yale Sterling Professor of Economics and Professor of Forestry and Environmental Studies at the Yale School of the Environment, said that while progress has been made in including the environment in national measures, there’s still work to be done to go beyond GDP.
“While the US pioneered environmental and natural accounts in the early years, it has fallen seriously behind in the last decade. We do not even have reliable data on the price of land, which is clearly key to understanding housing-price booms and busts and financial stability. The conference pointed to major developments in both the conceptual aspects and the empirical implementation that are taking place in many countries and described the exciting new initiative that is spearheaded by the Commerce Department and led by Yale economists. These efforts are important so that we have a better measure of the impact of natural and environmental assets on the economy and our well-being. Without them, we are flying blind in stormy weather,” said Nordhaus.
Going forward, Nordhaus said US augmented accounts should prioritize: subsoil assets, land, forest, water, air pollution, and climate.
Fran Silverman and Luke Strathmann contributed to this article, with input from the conference organizers. Photos by Mara Levitt for Yale School of the Environment.