Inclusive Income Accounts: Practical Measures to Go Beyond GDP

It is well known that Gross Domestic Product (GDP) is an incomplete measure of economic welfare. In particular, it excludes the value associated with natural and human capital. This paper develops two new measures, Gross and Net Inclusive Income as analogues to GDP and Net National Disposable Income (NNDI), using internally consistent National Accounts methods and existing data-sources to extend the scope of welfare measurement. Using exchange values, GII and NII do not incorporate externalities but do clarify trade-offs between the economic, environmental and social domains. This paper also presents and comments on experimental results. For example, after adjusting for atmospheric degradation, growth in the UK’s NII between 2008 and 2019 is faster than GDP growth, as traditional measures exclude efforts to reduce carbon emissions, suggesting that traditional productivity measures which exclude efforts to reduce carbon emissions may underestimate the extent of innovation in the UK.