PROFESSOR Sir Dieter Helm is perhaps best known for his development of the idea of natural capital: ‘The aggregate level of natural capital should not decline’.

If we benefit from damaging or depleting natural capital (for example, by burning fossil fuels) we should give future generations a share of the benefits. In his latest book, ‘Legacy: How to Build the Sustainable Economy’, he develops this theme further.

He considers four kinds of ‘capital’. First, natural capital: the Earth we have inherited, with minerals, water, air, climate and all living matter. Second, the stock of everything made by humans: buildings, infrastructure etc.

Third, human capital: the body of knowledge and ideas. Fourth, social capital: including trust, shared cultural norms, a shared ethical outlook (essential for addressing issues such as climate change and biodiversity loss) and a sense of the common good.

These four capital systems should be passed on to the next generation; insofar as they have been destroyed or damaged, other assets should be passed on.

This is the principle underlying the sustainable economy. The way we currently measure our success, focusing on GDP and growth, fails here.

Helm writes: ‘Neither it [GDP], nor the Keynesian economic policies constructed upon it, answer the question of whether we are being good stewards of our natural, physical, human and social capitals, and hence whether we are fulfilling our obligations to the next generation.’

One principle of the sustainable economy is ‘The polluter pays’.

Helm discusses applications of this principle. One consequence is that prices will be forced up, for goods and services that give rise to pollution or damage.

This will encourage us to change our habits, to focus on activities that do not pollute. This leads Helm to consider social justice and to propose a new constitution.

Henry Haslam is the author of ‘The Earth and Us’.