Reconciling the Green Accounts

In an optimally managed economy, green nationalexpenditure is equal to the linearization of the Hamiltonian from theproblem of maximizing discounted social utility. Herein, we utilize theadjoint conditions to add to the basis for viewing green NNP as an index ofsocial utility under ideal conditions and to show the equality of netnational income and expenditure. The results apply even when returns toscale are increasing or decreasing. Unpriced, net environmental benefitsshould be incorporated into comprehensive NNP in much the same way as thedisutility of labor. Otherwise, current practices of the national accountscan be defended, including the treatment of capital gains.