Adjusted Net Saving Needs Further Adjusting: Reassessing Human and Resource Factors in Sustainability Measurement

We build a theoretical model of optimal, closed-economy growth including inputs of human and
knowledge capital and growing natural resources, and give three approximate calibrations of it
to global economic growth during 1995-2014. We thereby show that the World Bank's Adjusted
Net Saving measure of an economy's sustainability ideally needs further adjusting, to include
omitted or undervalued estimates of productivity and population growth, human and knowledge
capital investment, and net growth in natural resource use. The net effect of these inclusions is
to raise estimated, global Adjusted Net Saving per person about 5-11% of GDP per person
above the World Bank's estimate, confirming the latter's gap with their implied estimate of
change in wealth per person, their preferred sustainability indicator. However, our adjustments
also omit all environmental costs, so on its own our methodology is intended just to inform
national, medium-term, non-environmental policies, where Adjusted Net Saving gives more
detailed and immediate feedback than change in wealth. By reclassifying nearly a fifth of output
from consumption to human and knowledge capital investments, and assuming only half of
human capital investment is in measured GDP, our third calibration needs no productivity growth
to explain global growth observed during 1995-2014.