Adjusting Green NNP to Measure Sustainability

Weitzman provides a foundation for NNP as the stationary equivalent of a wealth‐maximizing path when there is a constant interest rate and no exogenous technological progress. Here, the implications of Weitzman's foundation are explored in a case encountered in resource models, i.e., the case of non‐constant interest rates. In a setting that allows for exogenous technological progress, an expression for NNP is obtained that adjusts Green NNP for anticipated capital gains and interest rate effects to produce a measure that indicates sustainability. This result is important when measuring the relative sustainability of resource rich and resource poor countries.