"ENVIRONMENT", "NEEDS" AND REAL INCOME COMPARISONS

Conventional measures of national product make no pretence of including everything that affects welfare. As increasing attention is being paid to environmental pollution, the problem of incorporating certain non‐economic variables into the analysis of well‐being becomes more relevant. The object of this note is to show how a difference in “needs” for, and hence expenditures on, anti‐pollutants, which will show up in conventional national accounts comparisons as differences in “tastes”, should be converted into differences in real income.