Natural capital and the problematic measurement of GDP

I've been thinking a bit about GDP this year, and in particular about the weirdness of its measurement. One of the key problems that has occupied me has been an asymmetry in how capital is accounted for within GDP. When new capital is created, the spending on the new capital adds to GDP. However, when capital is depleted, that depletion does not subtract from GDP. That is why, following a large natural disaster, GDP might actually increase due to rebuilding activity (and because any destruction of capital is ignored).

With that in mind, I was interested to run across this 2019 article by Colin Mayer (Oxford University), Published in the journal Oxford Review of Economic Policy (ungated earlier version here), deep down in my to-be-read pile of articles. Mayer was a member of the UK's Natural Capital Committee, which ran from 2012 to 2020, and this article considers how economists can, and should, approach accounting for natural capital. Mayer distinguishes between economists' traditional view of natural capital, and an approach more similar to how an accountant would approach natural capital:

To the economist, natural capital, like any other asset, is the plaything of humans, there to be treated as mankind sees fit. To the accountant, the firm is an entity of which the managers are the stewards. They are there to preserve the firm and to promote its flourishing. So, too, we should consider whether it is our right to employ nature in the way in which we see fit, or our obligation to act as its steward or trustee.

Mayer's solution is that we should revise how natural capital is treated, and should:

...incorporate a maintenance charge in the balance sheets and profit and loss statements of nations, municipalities, corporations, and landowners to reflect the liability associated with maintaining or restoring these assets.

I think that Mayer could have been much clearer in the explanation here. When natural capital is depleted, through pollution, or extractive industries, or carbon emissions, my view is that the cost of that depletion should directly reduce GDP (which is the equivalent of the 'profit and loss statements' that Mayer refers to). Instead, Mayer seems to be suggesting that this is a liability. Both of those approaches may be correct, given the simple accounting identity (Assets + Expenses = Liabilities + Proprietorship + Revenues). A liability on the right-hand side of that identity equation can arise because of an expense on the left-hand side. However, the labelling as a liability implies an obligation to repay, which may not be the case for all types of natural capital (how would one pay off the liability of mining extraction, for instance?).

Anyway, there is clearly more thinking to be done here. I don't think that economists' approach to natural capital is correct. I think that the approach to other forms of capital (physical, social, and human capital) is similarly flawed. For example, decreasing social capital over time (as accounted by Robert Putnam's 2000 book Bowling Alone (which I reviewed here) should also decrease GDP in my view. By correctly accounting for changes in capital (both upwards and downwards) GDP would better capture changes in societal-level wellbeing.