Keywords: Fisherian income, Hicksian income, growth, macro-investment policy, Australia, ecological economics, sustainable economic welfare, sustainable development
Using the Fisherian concept of income to guide a nation's macro-investment policy
A relatively new group of economists called 'ecological economists' believe that continuing macro-economic expansion eventually leads to a decline in sustainable economic welfare. Ecological economists have therefore called for a halt to the high-growth policies being widely adopted by many governments. To support their belief, and to demonstrate how Fisherian income can serve as a useful guide to a nation's macro-investment policy, a relatively simple formula for calculating Fisherian income is introduced and calculated for Australia for the period 1967–1997. The empirical evidence suggests that Australia may have surpassed its optimal or sufficient macro-economic scale in the mid-1970s. While, around this time, Australia began a transition to a lower rate of growth that arrested the steep decline in per capita Fisherian income, Australia had reverted back to a high-growth policy by the end of the study period. It chose not to continue the deceleration towards a steady-state economy. By 1997, per capita Fisherian income had increased to mid-1970s levels; however, the recent change in Australia's macro-investment policy is likely to have a detrimental long-term impact on the sustainable economic welfare enjoyed by its citizens.