GDP calculations do not directly include the economice costs of enviornmental damage.?
for example .. Global warming, acid rain. Do you think these cost should be included in GDP? Why or Why not?? How could GDP be amended to include environmental damage cost?
- Dave BLv 610 years agoFavorite Answer
Non-cash costs that you described should not and, as a practical matter, cannot be figured into GDP until the people are hired to clean up the mess. When that happens, their salaries and profit of their consulting companies go toward GDP. In fact, while your question seems to imply GDP ought to be reduced by the amounts of the cost of dealing with it, quite the opposite is true because cleaning stuff up is economic activity. So is suing to recover damages for it.
But you have a more fundamental problem. What asset are you talking about reducing, when, and by how much? Real estate? Well, if there is less resale value in the real estate affected, there's your reduction, but only at time of sale, which can lag by many, many years, or get bought by a forest preserve or state park, and then figure into GNP as a positive. But there is no way to make the valuation right when the pollution occurs because price is simply how much someone will agree to trade you for something.