Environmental Quality and Residuals Management: Report of a Research Program on Economic, Technological, and Institutional Aspects

We have seen that the costs of reducing the discharge of residuals, while still quite uncertain, will be large. They are substantial enough to raise concerns about how such costs, and the changing service flows from the common property resources they are intended to protect, should be reflected in our national income accounting. At present, such aggregative economic measures as national production and labor productivity are affected differently, depending upon whether REQM outlays are made in the public or the private sector. Accordingly, some adjustments are indicated if only on the grounds of consistency. These macroeconomic issues have received both conceptual and quantitative attention in recent years in the Quality of the Environment program (and in the economics profession generally). This chapter describes the results of our analyses of the national income accounting issue.

Should gross national product (GNP) and net national product (NNP) be modified to account for ambient environmental quality deterioration and the costs of reducing that deterioration? The question of whether the aggregate output accounts should be modified to reflect the growing generation, handling, and discharge of residuals can be interpreted in two ways. First, should the official definitions of the national income and product accounts be changed, and, second, should auxiliary modified series be presented along with the official series based on unchanged definitions? Generally it appears that the official series should be continued on the basis of the present definitions, both because of the desirability of avoiding breaks in the series and also because the potential advantages

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