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Theoretical Connections

In theory, and under some quite strong assumptions, there exists an important rigorous quantitative relationship among the following four fundamental economic concepts: (1) ìwealthî; (2) ìincomeî; (3)ìsustainabilityî; (4) ìaccountingî. These four basic concepts are placed in quotation marks here because a necessary Örst step will be to carefully and rigorously deÖne what exactly is meant by each concept. In this paper, I review what is known about this important four-fold quantitative relationship in an ultra-simpliÖed setting. I identify some basic applications of this simpliÖed economic theory of wealth and income (and sustainability and accounting). While the contents of this paper are expressed at a very high level of abstraction and require some restrictive assumptions, I believe that the fundamental four-fold relationship it sharply highlights is useful for understanding, at least in principle, what is ìwealthîand what is its theoretical relationship to ìincome,î ìsustainability,îand ìaccounting.î In theory, and under some quite strong assumptions, there exists an important rigorous quantitative relationship among the following four fundamental economic concepts: (1) “wealth”; (2) “income”; (3) “sustainability”; (4) “accounting”. These four basic concepts are placed in quotation marks here because a necessary first step will be to carefully and rigorously define what exactly is meant by each concept. In this paper, I review what is known about this important four-fold quantitative relationship in an ultra-simplified setting. I identify some basic applications of this simplified economic theory of wealth and income (and sustainability and accounting). While the contents of this paper are expressed at a very high level of abstraction and require some restrictive assumptions, I believe that the fundamental four-fold relationship it sharply highlights is useful for understanding, at least in principle, what is “wealth” and what is its theoretical relationship to “income,” “sustainability,” and “accounting.”