Sustain Our Earth

IMF managing director Christine Lagarde announced at a CGD event on Tuesday that the IMF would provide research and analytic support in three areas crucial to sustainable development: carbon pricing, phasing out fossil fuel subsidies and green national accounting, that is, development of new measures of economic progress that take into account environmental costs and benefits not included in Gross Domestic Product (GDP). She also announced that she would be attending the Rio+20 Earth Summit in Brazil next week, a first for an IMF head. (See here for Lawrence MacDonald’s summary and analysis of the speech.)

In comments after the speech, Nancy Birdsall singled out the IMF work on new ways to measure economic activity as having far-reaching consequences. I agree. Current measures too often count environmental destruction as a benefit—a forest only counts in GDP when it is cut down and turned into timber. Everybody knows we need a better yardstick. Lagarde’s speech is a welcome endorsement from the citadel of economic orthodoxy of the clear need for new and better measures