A dynamic price index theory for deflating green net national product: an illustrative application using data from the United States

This paper is concerned with the welfare significance of real comprehensive net national product based on an exact dynamic price index. The authors extend the Konus classical index number theory by taking into account current environmental externalities and investment for future consumption enhancement. It is shown that, when deflated with the proper dynamic price index, the real green net national product becomes an ideal measure for welfare comparisons over time. The authors demonstrate the application of the theory using time series data from the United States over the period from 1959 to 2008.