The Concept of Adjusted Net Savings Essay Example | Topics and Well Written Essays - 1500 words

The Concept of Adjusted Net Savings - Essay Example Some of the recent theoretical work has derived the association between development prospects and saving effort. There are two results associated with the linkage levels of the saving and the development prospect (positive and negative adjusted net savings). Savings, in this case, is described as the change in the real wealth excluding the capital gains (Organization for Economic Co-operation and Development 2004, p31). Â  The first result is positive adjusted net savings and in this case, the current value of the social welfare that is along the path of development increases. It has the implication that the development path in which the net saving is positive is located where the current value of the social welfare is ever increasing. To evaluate the improvement of the social welfare, net saving can be used sufficiently to measure it. The second result is negative adjusted net savings and in this case, the current value of the social welfare is declining; the level of the social welfare over sometime in the future along the development path will be lower than the present social welfare. This implies that the economy is on a path that is unsustainable, thus, negative net savings indicates unsustainability in an economy (Organization for Economic Co-operation and Development 2004, p31). Â  According to The World Bank, adjusted net saving is used as a sustainability indicator that is based on the concepts of the green national accounts. Adjusted net savings evaluates the economy’s true rate of savings after taking into consideration the account the depletion of the natural resources, investments in the human capital, and the harm caused by pollution. Other than serving as an indicator of sustainability, adjusted net savings is also an indicator of policy (The World Bank 2010, p1).