Genuine Progress Indicator
Encyclopedia
The genuine progress indicator (GPI) is an alternative metric system which is an addition to the national system of accounts that has been suggested to replace, or supplement, gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 (GDP) as a metric of economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

. The GPI is used in green economics, sustainability and more inclusive types of economics commonly known as "True Cost" economics.

GPI is an attempt to measure whether a country's growth, increased production of goods, and expanding services have actually resulted in the improvement of the welfare (or well-being) of the people in the country. GPI advocates claim that it can more reliably measure economic progress, as it distinguishes between worthwhile growth and uneconomic growth
Uneconomic growth
Uneconomic growth, in human development theory, welfare economics , and some forms of ecological economics, is economic growth that reflects or creates a decline in the quality of life. The concept is attributed to the economist Herman Daly, though other theorists can also be credited for the...

.

The GDP vs the GPI is analogous to the difference between the gross profit of a company and the net profit; the Net Profit is the Gross Profit minus the costs incurred. Accordingly, the GPI will be zero if the financial costs of crime and pollution equal the financial gains in production of goods and services, all other factors being constant.

Motivation

Most economists assess the progress in welfare of the people by comparing the gross domestic product over time, that is, by adding up the annual dollar value of all goods and services produced within a country over successive years. However, GDP was never intended to be used for such purpose. It is prone to productivism
Productivism
Productivism is the belief that measurable economic productivity and growth is the purpose of human organization , and that "more production is necessarily good".-Arguments for productivism:...

 or consumerism
Consumerism
Consumerism is a social and economic order that is based on the systematic creation and fostering of a desire to purchase goods and services in ever greater amounts. The term is often associated with criticisms of consumption starting with Thorstein Veblen...

, over-valuing production and consumption of goods, and not reflecting improvement in human well-being. It also fails to distinguish between money spent for new production and money spent to repair negative outcomes from previous expenditure. For example, one million dollars spent to build new homes may be an indication of progress but one million dollars spent in aid relief to those whose homes have been destroyed is not the same kind of progress. This becomes important especially when considering the true costs of development that destroys wetlands and hence exacerbate flood damages. Simon Kuznets
Simon Kuznets
Simon Smith Kuznets was a Russian American economist at the Wharton School of the University of Pennsylvania who won the 1971 Nobel Memorial Prize in Economic Sciences "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and...

, the inventor of the concept of the GDP, notes in his very first report to the US Congress in 1934:
...the welfare of a nation [can] scarcely be inferred from a measure of national income...


An adequate measure must also take into account ecological yield
Ecological yield
Ecological yield is the harvestable population growth of an ecosystem. It is most commonly measured in forestry;sustainable forestry is defined as that which does not harvest more wood in a year than has grown in that year, within a given patch of forest....

 and the ability of nature to provide services
Ecosystem services
Humankind benefits from a multitude of resources and processes that are supplied by natural ecosystems. Collectively, these benefits are known as ecosystem services and include products like clean drinking water and processes such as the decomposition of wastes...

. These things are part of a more inclusive ideal of progress, which transcends the traditional focus on raw industrial production.

Theoretical foundation

The need for a GPI to supplement biased indicators such as GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 was highlighted by analyses of uneconomic growth
Uneconomic growth
Uneconomic growth, in human development theory, welfare economics , and some forms of ecological economics, is economic growth that reflects or creates a decline in the quality of life. The concept is attributed to the economist Herman Daly, though other theorists can also be credited for the...

 in the 1980s notably that of Marilyn Waring
Marilyn Waring
Marilyn Waring, CNZM, D.Phil., D.Litt. is a New Zealand feminist, a politician, an activist for female human rights and environmental issues, an author and an academic, known for her contributions to feminist economics....

 who studied biases in the UN System of National Accounts
United Nations System of National Accounts
The United Nations System of National Accounts is an international standard system of national accounts, the first international standard being published in 1953...

.

By the early 1990s there was a consensus in human development theory
Human development theory
Human development theory is a theory that merges older ideas from ecological economics, sustainable development, welfare economics, and feminist economics. It seeks to avoid the overt normative politics of most so-called "green economics" by justifying its theses strictly in ecology, economics and...

 and ecological economics
Ecological economics
Image:Sustainable development.svg|right|The three pillars of sustainability. Clickable.|275px|thumbpoly 138 194 148 219 164 240 182 257 219 277 263 291 261 311 264 331 272 351 283 366 300 383 316 394 287 408 261 417 224 424 182 426 154 423 119 415 87 403 58 385 40 368 24 347 17 328 13 309 16 286 26...

 that growth in money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...

 was actually reflective of a loss of well-being: that lacks of essential natural and social services were being paid for in cash and that this was expanding the economy but degrading life.

The matter remains controversial and is a main issue between advocates of green economics and neo-classical economics. Neoclassical economists understand the limitations of GDP for measuring human wellbeing but nevertheless regard GDP as an important, though imperfect measure of economic output and would be wary of too close an identification of GDP growth with aggregate human welfare. However GDP tends to be reported as synonymous with economic progress by journalists and politicians and the GPI seeks to correct this shorthand by providing a more encompassing measure.

Some economists, notably Herman Daly
Herman Daly
Herman Daly is an American ecological economist and professor at the School of Public Policy of University of Maryland, College Park in the United States....

, John B. Cobb
John B. Cobb
John B. Cobb, Jr. is an American United Methodist theologian who played a crucial role in the development of process theology. He integrated Alfred North Whitehead's metaphysics into Christianity, and applied it to issues of social justice.-Biography:John Cobb was born in Kobe, Japan in 1925 to...

 and Philip Lawn have asserted that a country's growth, increased goods production, and expanding services have both "costs" and "benefits"--not just the "benefits" that contribute to GDP. They assert that, in some situations, expanded production facilities damage the health, culture, and welfare of people. Growth that was in excess of sustainable norms (e.g. of ecological yield
Ecological yield
Ecological yield is the harvestable population growth of an ecosystem. It is most commonly measured in forestry;sustainable forestry is defined as that which does not harvest more wood in a year than has grown in that year, within a given patch of forest....

) had to be considered to be uneconomic
Uneconomic growth
Uneconomic growth, in human development theory, welfare economics , and some forms of ecological economics, is economic growth that reflects or creates a decline in the quality of life. The concept is attributed to the economist Herman Daly, though other theorists can also be credited for the...

. According to the "threshold hypothesis", developed by Manfred Max-Neef
Manfred Max-Neef
Artur Manfred Max Neef is a Chilean economist and environmentalist mainly known for his human development model based on Fundamental human needs. He is of German descent...

, the notion that when macroeconomic systems expand beyond a certain size, the additional benefits of growth are exceeded by the attendant costs. (Max-Neef 1995.)

According to Lawn's model, the "costs" of economic activity include the following potential harmful effects:
  • Cost of resource depletion
    Resource depletion
    Resource depletion is an economic term referring to the exhaustion of raw materials within a region. Resources are commonly divided between renewable resources and non-renewable resources...

  • Cost of crime
    Crime
    Crime is the breach of rules or laws for which some governing authority can ultimately prescribe a conviction...

  • Cost of ozone depletion
    Ozone depletion
    Ozone depletion describes two distinct but related phenomena observed since the late 1970s: a steady decline of about 4% per decade in the total volume of ozone in Earth's stratosphere , and a much larger springtime decrease in stratospheric ozone over Earth's polar regions. The latter phenomenon...

  • Cost of family breakdown
  • Cost of air
    Air pollution
    Air pollution is the introduction of chemicals, particulate matter, or biological materials that cause harm or discomfort to humans or other living organisms, or cause damage to the natural environment or built environment, into the atmosphere....

    , water
    Water pollution
    Water pollution is the contamination of water bodies . Water pollution occurs when pollutants are discharged directly or indirectly into water bodies without adequate treatment to remove harmful compounds....

    , and noise pollution
    Noise pollution
    Noise pollution is excessive, displeasing human, animal or machine-created environmental noise that disrupts the activity or balance of human or animal life...

  • Loss of farmland
    Arable land
    In geography and agriculture, arable land is land that can be used for growing crops. It includes all land under temporary crops , temporary meadows for mowing or pasture, land under market and kitchen gardens and land temporarily fallow...

  • Loss of wetland
    Wetland
    A wetland is an area of land whose soil is saturated with water either permanently or seasonally. Wetlands are categorised by their characteristic vegetation, which is adapted to these unique soil conditions....

    s


Analysis by Robert Costanza
Robert Costanza
Robert Costanza is an American ecological economist is a University Professor of Sustainability at Portland State University in Oregon.- Biography :Robert Costanza was born in Pittsburgh, Pennsylvania....

 also around 1995 of nature's services
Ecosystem services
Humankind benefits from a multitude of resources and processes that are supplied by natural ecosystems. Collectively, these benefits are known as ecosystem services and include products like clean drinking water and processes such as the decomposition of wastes...

 and their value showed that a great deal of degradation of nature's ability to clear waste, prevent erosion, pollinate crops, etc., was being done in the name of monetary profit opportunity: this was adding to GDP but causing a great deal of long term risk in the form of mudslides, reduced yields, lost species, water pollution, etc. Such effects have been very marked in areas that suffered serious deforestation
Deforestation
Deforestation is the removal of a forest or stand of trees where the land is thereafter converted to a nonforest use. Examples of deforestation include conversion of forestland to farms, ranches, or urban use....

, notably Haiti
Haiti
Haiti , officially the Republic of Haiti , is a Caribbean country. It occupies the western, smaller portion of the island of Hispaniola, in the Greater Antillean archipelago, which it shares with the Dominican Republic. Ayiti was the indigenous Taíno or Amerindian name for the island...

, Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...

, and some coastal mangrove
Mangrove
Mangroves are various kinds of trees up to medium height and shrubs that grow in saline coastal sediment habitats in the tropics and subtropics – mainly between latitudes N and S...

 regions of India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...

 and South America
South America
South America is a continent situated in the Western Hemisphere, mostly in the Southern Hemisphere, with a relatively small portion in the Northern Hemisphere. The continent is also considered a subcontinent of the Americas. It is bordered on the west by the Pacific Ocean and on the north and east...

. Some of the worst land abuses for instance have been shrimp farm
Shrimp farm
A shrimp farm is an aquaculture business for the cultivation of marine shrimp or prawns for human consumption. Commercial shrimp farming began in the 1970s, and production grew steeply, particularly to match the market demands of the United States, Japan and Western Europe...

ing operations that destroyed mangroves, evicted families, left coastal lands salted and useless for agriculture, but generated a significant cash profit for those who were able to control the export market in shrimp: this has become a signal example to those who contest the idea that GDP growth is necessarily desirable.

GPI takes account of these problems by incorporating sustainability
Sustainability
Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...

: whether a country's economic activity over a year has left the country with a better or worse future possibility of repeating at least the same level of economic activity in the long run. For example, agricultural activity that uses replenishing water resources, such as river runoff, will score a higher GPI than the same level of agricultural activity that drastically lowers the water table by pumping irrigation water from wells.

"Income" vs. "capital depletion"

Hicks
John Hicks
Sir John Richard Hicks was a British economist and one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model , which...

 (1946) pointed out that the practical purpose of calculating income is to indicate the maximum amount people can produce and consume without undermining their capacity to produce and consume the same amount in the future. From a national income perspective, it is necessary to answer the following question: ‘‘Can a nation’s entire GDP be consumed without undermining its ability to produce and consume the same GDP in the future?’’ This question is however largely ignored in contemporary economics, but fits under the idea of sustainability.

Applying the genuine progress indicator to legislative decisions

The best known attempts to apply the concepts of GPI to legislative decisions are probably the GPI Atlantic indicator pioneered by Ronald Colman for Atlantic Canada
Atlantic Canada
Atlantic Canada is the region of Canada comprising the four provinces located on the Atlantic coast, excluding Quebec: the three Maritime provinces – New Brunswick, Prince Edward Island, and Nova Scotia – and Newfoundland and Labrador...

, the Alberta GPI pioneered by ecological economist Mark Anielski to measure the long-term economic, social and environmental sustainability of the province of Alberta
Alberta
Alberta is a province of Canada. It had an estimated population of 3.7 million in 2010 making it the most populous of Canada's three prairie provinces...

 and the environmental and sustainable development indicators used by the Government of Canada
Government of Canada
The Government of Canada, formally Her Majesty's Government, is the system whereby the federation of Canada is administered by a common authority; in Canadian English, the term can mean either the collective set of institutions or specifically the Queen-in-Council...

 to measure its own progress to achieving well-being goals: its Environment and Sustainable Development Indicators Initiative (Canada) is a substantial effort to justify state services in GPI terms. It assigns the Commissioner for the Environment and Sustainable Development (Canada), an officer in the Auditor-General of Canada's office, to perform the analysis and report to the House of Commons
Canadian House of Commons
The House of Commons of Canada is a component of the Parliament of Canada, along with the Sovereign and the Senate. The House of Commons is a democratically elected body, consisting of 308 members known as Members of Parliament...

. However, Canada continues to state its overall budgetary targets in terms of reducing its debt to GDP ratio
Debt to GDP ratio
In economics, the debt-to-GDP ratio is one of the indicators of the health of an economy.It is the amount of national debt of a country as a percentage of its Gross Domestic Product ....

, which implies that GDP increase and debt reduction in some combination are its main priorities.

In the EU
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

 the Metropole
Metropole
The metropole, from the Greek Metropolis 'mother city' was the name given to the British metropolitan centre of the British Empire, i.e. the United Kingdom itself...

 efforts and the London Health Observatory methods are equivalents focused mostly on urban lifestyle.

The EU and Canadian efforts are among the most advanced in any of the G8
G8
The Group of Eight is a forum, created by France in 1975, for the governments of seven major economies: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. In 1997, the group added Russia, thus becoming the G8...

 or OECD nations, but there are parallel efforts to measure quality of life
Quality of life
The term quality of life is used to evaluate the general well-being of individuals and societies. The term is used in a wide range of contexts, including the fields of international development, healthcare, and politics. Quality of life should not be confused with the concept of standard of...

 or standard of living
Standard of living
Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods , or measures of health such as...

 in health
Health
Health is the level of functional or metabolic efficiency of a living being. In humans, it is the general condition of a person's mind, body and spirit, usually meaning to be free from illness, injury or pain...

 (not strictly wealth
Wealth
Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...

) terms in all developed nation
Developed country
A developed country is a country that has a high level of development according to some criteria. Which criteria, and which countries are classified as being developed, is a contentious issue...

s. This has also been a recent focus of the labour movement
Labour movement
The term labour movement or labor movement is a broad term for the development of a collective organization of working people, to campaign in their own interest for better treatment from their employers and governments, in particular through the implementation of specific laws governing labour...

.

Criticism

GDP is a value neutral measure according to its proponents (but not according to its opponents). It is relatively straightfoward to measure compared to GPI (although measuring GDP is actually quite difficult and involves many choices). Competing measures like GPI define well-being to mean things that the definers ideologically support. Therefore, opponents of GPI claim that GPI cannot function to measure the goals of a diverse, plural society. Supporters of GPI would respond that GDP, when used as a measure of societal well-being, ends up defining well-being to be things that the supporters of GDP ideologically support, and cannot function to measure the goals of a diverse, plural society. Supporters of GDP as a measure of societal well-being claim that competing measures such as GPI are more vulnerable to political manipulation.

Finnish economists Mika Maliranta and Niku Määttänen write that the problem of alternative development indexes is their attempt to combine things that are incommensurable. It is hard to say what they exactly indicate and difficult to make decisions based on them. They can be compared to an indicator that shows the mean of a car's velocity and the amount of fuel left.

They add that it indeed seems as if the economy has to grow in order for the people to even remain as happy as they are at present. In Japan, for example, the degree of happiness expressed by the citizens in polls has been declining since the early 1990s, the period when Japan's economic growth stagnated.

Supporting countries and groups

  • Canada planning applications. GDP has functioned as an "income sheet". GPI will function as a "balance sheet," taking into consideration that some income sources are very costly and contribute a negative profit overall.
  • Redefining Progress. Reports and analyses. A non-profit organization with headquarters in Oakland, California. See also: Publications of Redefining Progress
  • Beyond GDP An initiative of the European Union
    European Union
    The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

    , Club of Rome
    Club of Rome
    The Club of Rome is a global think tank that deals with a variety of international political issues. Founded in 1968 at Accademia dei Lincei in Rome, Italy, the CoR describes itself as "a group of world citizens, sharing a common concern for the future of humanity." It consists of current and...

    , WWF
    WWF
    WWF may refer to:*World Wide Fund for Nature, a nature conservation organisation previously named World Wildlife Fund WWF may refer to:*World Wide Fund for Nature, a nature conservation organisation previously named World Wildlife Fund WWF may refer to:*World Wide Fund for Nature, a nature...

     and OECD.

See also

  • Wikiprogress
    Wikiprogress
    Wikiprogress is a online platform for sharing information on the measurement of social, economic and environmental progress. It is thought to facilitate sharing on ideas, initiatives and knowledge on "measuring the progress of societies"...

  • Ecological footprint
    Ecological footprint
    The ecological footprint is a measure of human demand on the Earth's ecosystems. It is a standardized measure of demand for natural capital that may be contrasted with the planet's ecological capacity to regenerate. It represents the amount of biologically productive land and sea area necessary to...

  • Full cost accounting
    Full cost accounting
    Full cost accounting generally refers to the process of collecting and presenting information - about environmental, social, and economic costs and benefits/advantages - for each proposed alternative when a decision is necessary. It is a conventional method of cost accounting that traces direct...

     (FCA) (with relevance to the environment)
  • Genuine Wealth Assessment
    Genuine wealth assessment
    The Genuine wealth assessment is an alternative metric system which has been suggested to supplement gross domestic product as a metric of economic growth. Specifically, the GWA is used to assess the well-being of communities....

  • Global Peace Index
    Global Peace Index
    The Global Peace Index is an attempt to measure the relative position of nations' and regions' peacefulness. It is the product of Institute for Economics and Peace and developed in consultation with an international panel of peace experts from peace institutes and think tanks with data collected...

  • Green gross domestic product
    Green Gross Domestic Product
    The green gross domestic product is an index of economic growth with the environmental consequences of that growth factored in. Green GDP monetizes the loss of biodiversity, and accounts for costs caused by climate change...

     (Green GDP)
  • Gross domestic product
    Gross domestic product
    Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

     (GDP)
  • Happy Planet Index
    Happy Planet Index
    The Happy Planet Index is an index of human well-being and environmental impact that was introduced by the New Economics Foundation in July 2006. The index is designed to challenge well-established indices of countries’ development, such as Gross Domestic Product and the Human Development Index...

     (HPI)
  • Human Development Index
    Human Development Index
    The Human Development Index is a composite statistic used to rank countries by level of "human development" and separate "very high human development", "high human development", "medium human development", and "low human development" countries...

     (HDI)
  • ISEW (Index of sustainable economic welfare)
  • Living planet index
    Living Planet Index
    The Living Planet Index is an indicator of the state of global biological diversity, based on trends in vertebrate populations of species from around the world....

  • Quality-of-life index
    Quality-of-life index
    The Economist Intelligence Unit’s quality-of-life index is based on a unique methodology that links the results of subjective life-satisfaction surveys to the objective determinants of quality of life across countries...


News articles


Scientific articles and books

  • A. Charles, C. Burbidge, H. Boyd and A. Lavers. 2009. Fisheries and the Marine Environment in Nova Scotia: Searching for Sustainability and Resilience. GPI Atlantic. Halifax, Nova Scotia. Web: http://www.gpiatlantic.org/pdf/fisheries/fisheries_2008.pdf
  • Colman, Ronald. (2003). Economic Value of Civic and Voluntary Work. GPI Atlantic. Halifax, Nova Scotia. Web: http://www.gpiatlantic.org/publications/summaries/volsumm.pdf
  • Anielski, M, M. Griffiths, D. Pollock, A. Taylor, J. Wilson, S. Wilson. 2001. Alberta Sustainability Trends 2000: Genuine Progress Indicators Report 1961 to 1999. Pembina Institute for Appropriate Development. April 2001. http://www.anielski.com/Publications.htm (see the Alberta Genuine Progress Indicators Reports)
  • Anielski, M. 2001. The Alberta GPI Blueprint: The Genuine Progress Indicator (GPI) Sustainable Well-Being Accounting System. Pembina Institute for Appropriate Development. September 2001.http://www.anielski.com/Publications.htm (see the Alberta Genuine Progress Indicators Reports)
  • Anielski, M. and C. Soskolne. 2001. “Genuine Progress Indicator (GPI) Accounting: Relating Ecological Integrity to Human Health and Well-Being.” Paper in Just Ecological Integrity: The Ethics of Maintaining Planetary Life, eds. Peter Miller and Laura Westra. Lanham, Maryland: Rowman and Littlefield: pp. 83–97.
  • Daly, H., 1996. Beyond Growth: The Economics of Sustainable Development. Beacon Press, Boston.
  • Daly, H. & Cobb, J., 1989. For the Common Good. Beacon Press, Boston.
  • Fisher, I.
    Irving Fisher
    Irving Fisher was an American economist, inventor, and health campaigner, and one of the earliest American neoclassical economists, though his later work on debt deflation often regarded as belonging instead to the Post-Keynesian school.Fisher made important contributions to utility theory and...

    , 1906. Nature of Capital and Income. A.M. Kelly, New York.
  • Hicks
    John Hicks
    Sir John Richard Hicks was a British economist and one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model , which...

    , J., 1946. Value and Capital
    Value and Capital
    Value and Capital is a book by the British economist John Richard Hicks, published in 1939. It is considered a classic exposition of microeconomic theory...

    , Second Edition. Clarendon, London.
  • Redefining Progress, 1995. "Gross production vs genuine progress". Excerpt from the Genuine Progress Indicator: Summary of Data and Methodology. Redefining Progress, San Francisco.
  • L. Pannozzo, R. Colman, N. Ayer, T. Charles, C. Burbidge, D. Sawyer, S. Stiebert , A. Savelson, C. Dodds. (2009). The 2008 Nova Scotia GPI Accounts; Indicators of Genuine Progress . GPI Atlantic. Halifax, Nova Scotia. Web: http://www.gpiatlantic.org/pdf/integrated/gpi2008.pdf

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
x
OK