Depletion of Australia's non-renewable natural resources: a comment on Common and Sanyal

The July 1998 issue of Ecological Economics contains a 'Commentary' by Mick Common and Kali Sanyal who apply a number of green accounting approaches t o estimate what they label 'natural resource depreciation' of Australia's n onrenewable resources. Their efforts, not unexpectedly, yielded differing r esults, and they felt confident enough to offer as 'a cautionary tale' thei r conclusion that 'robust measurement of natural resource depreciation is u nlikely, and that results appertaining to such should be treated scepticall y' (,Abstract, p. 24, and Concluding Remarks, p. 29). The main purpose of t he present comment is to dispel this unfounded conclusion. Common and Sanya l's contribution raises questions about the way they have perceived and int erpreted the methods they considered; their inappropriate mixing of nationa l accounting methods with incompatible analytical devices including shadow pricing; and their unswerving focus on stock-value accounting in an unworka ble attempt at integrating 'capital theory' into national accounting. The c hief product of the national accounts, this paper argues, is not the value of assets or changes in that value, but the estimation of the flow accounts which center on income and product. Deriving changes in the flow accounts from changes in stock value in the name of applied capital theory inflicts inestimable damage on what has always been the primary purpose of national accounting. (C) 1999 Elsevier Science B.V. All rights reserved.