ListMoto - Genuine Progress Indicator

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GENUINE PROGRESS INDICATOR (GPI) is a metric that has been suggested to replace, or supplement, gross domestic product (GDP) as a measure of economic growth . The GPI is designed to take fuller account of the well-being of a nation, only a part of which pertains to the health of the nation's economy, by incorporating environmental and social factors which are not measured by GDP. For instance, some models of GPI decrease in value when the poverty rate increases.

The GPI is used in ecological economics , "green" economics, sustainability and more inclusive types of economics. It factors in environmental and carbon footprints that businesses produce or eliminate, including in the forms of resource depletion , pollution and long-term environmental damage. GDP is increased twice when pollution is created, since it increases once upon creation (as a side-effect of some valuable process) and again when the pollution is cleaned up; in contrast, GPI counts the initial pollution as a loss rather than a gain, generally equal to the amount it will cost to clean up later plus the cost of any negative impact the pollution will have in the mean time. While quantifying costs and benefits of these environmental and social externalities is a difficult task, "Earthster-type databases could bring more precision and currency to GPI's metrics." It has been noted that such data may also be embraced by those who attempt to "internalize externalities" by making companies pay the costs of the pollution they create (rather than having the government or society at large bear those costs) "by taxing their goods proportionally to their negative ecological and social impacts".

GPI is an attempt to measure whether the environmental impact and social costs of economic production and consumption in a country are negative or positive factors in overall health and well-being. By accounting for the costs borne by the society as a whole to repair or control pollution and poverty, GPI balances GDP spending against external costs. GPI advocates claim that it can more reliably measure economic progress, as it distinguishes between the overall "shift in the 'value basis' of a product, adding its ecological impacts into the equation". :Ch. 10.3 Comparatively speaking, the relationship between GDP and GPI is analogous to the relationship between the gross profit of a company and the net profit; the net profit is the gross profit minus the costs incurred, while the GPI is the GDP (value of all goods and services produced) minus the environmental and social costs. Accordingly, the GPI will be zero if the financial costs of poverty and pollution equal the financial gains in production of goods and services, all other factors being constant.


* 1 Motivation

* 2 Theoretical foundation

* 2.1 "Income" vs. "capital depletion"

* 3 In legislative decisions * 4 Calculation * 5 Components * 6 Development in the United States * 7 Development in Finland * 8 Development in Finland regions * 9 Criticism * 10 Supporting countries and groups * 11 See also * 12 References

* 13 Further reading

* 13.1 News articles * 13.2 Scientific articles and books

* 14 External links


Most economists assess progress in people's welfare 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 not intended to be used for such purpose. It is prone to productivism or consumerism , over-valuing production and consumption of goods, and not reflecting improvement in human well-being. It also does not distinguish between money spent for new production and money spent to repair negative outcomes from previous expenditure. For example, it would treat as equivalent one million dollars spent to build new homes and one million dollars spent in aid relief to those whose homes have been destroyed, despite these expenditures arguably not representing the same kind of progress. This is relevant for example when considering the true costs of development that destroys wetlands and hence exacerbate flood damages. Simon Kuznets , the inventor of the concept of GDP, noted in his first report to the US Congress in 1934:

the welfare of a nation can scarcely be inferred from a measure of national income. If the GDP is up, why is America down? Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what.

Some have argued that an adequate measure must also take into account ecological yield and the ability of nature to provide services , and that these things are part of a more inclusive ideal of progress, which transcends the traditional focus on raw industrial production.


The need for a GPI to supplement biased indicators such as GDP was highlighted by analyses of uneconomic growth in the 1980s, notably that of Marilyn Waring
Marilyn Waring
, who studied biases in the UN System of National Accounts .

By the early 1990s, there was a consensus in human development theory and ecological economics that growth in money supply 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 neoclassical economics . Neoclassical economists understand the limitations of GDP for measuring human well-being 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 , John B. Cobb
John B. Cobb
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 ) had to be considered to be uneconomic. According to the "threshold hypothesis", developed by Manfred Max-Neef , "when macroeconomic systems expand beyond a certain size, the additional benefits of growth are exceeded by the attendant costs" (Max-Neef 1995). This hypothesis is borne out in data comparing GDP/capita with GPI/capita from 17 countries. The graph demonstrates that, while GDP does increase overall well-being to a point, beyond $7,000 GDP/capita the increase in GPI is reduced or remains stagnant. Similar trends can be seen when comparing GDP to life satisfaction as well as in a Gallup Poll published in 2008.

According to Lawn's model, the "costs" of economic activity include the following potential harmful effects:

* Cost of resource depletion * Cost of crime * Cost of ozone depletion * Cost of family breakdown * Cost of air , water , and noise pollution * Loss of farmland * Loss of wetlands

Analysis by Robert Costanza also around 1995 of nature\'s services 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 , notably Haiti
, Indonesia
, and some coastal mangrove regions of India
and South America
South America
. Some of the worst land abuses for instance have been shrimp farming 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 systems generally try to take account of these problems by incorporating sustainability : 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, would score a higher GPI than the same level of agricultural activity that drastically lowers the water table by pumping irrigation water from wells.


Hicks (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 largely ignored in contemporary economics but fits under the idea of sustainability .


The best-known attempts to apply the concepts of GPI to legislative decisions are probably the Atlantic indicator invented by Ronald Colman for Atlantic Canada
Atlantic Canada
, the Alberta
GPI created by ecological economist Mark Anielski to measure the long-term economic, social and environmental sustainability of the province of Alberta
and the "environmental and sustainable development indicators" used by the Government of Canada
Government of Canada
to measure its own progress to achieving well-being goals: its Environment and Sustainable Development Indicators Initiative (Canada) is an 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 . However, Canada continues to state its overall budgetary targets in terms of reducing its debt to GDP ratio , which implies that GDP increase and debt reduction in some combination are its main priorities.

In the European Union
European Union
(EU) the Metropole 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 or OECD
nations, but there are parallel efforts to measure quality of life or standard of living in health (not strictly wealth ) terms in all developed nations . This has also been a recent focus of the labour movement .


The calculation of GPI presented in the simplified form is the following:

GPI = A + B - C - D + I

A is income weighted private consumption

B is value of non-market services generating welfare

C is private defensive cost of natural deterioration

D is cost of deterioration of nature and natural resources

I is increase in capital stock and balance of international trade

The GPI indicator is based on the concept of sustainable income, presented by economist John Hicks
John Hicks
(1948). The sustainable income is the amount a person or an economy can consume during one period without decreasing his or her consumption during the next period. In the same manner, GPI depicts the state of welfare in the society by taking into account the ability to maintain welfare on at least the same level in the future.


The Genuine Progress Indicator is measured by 26 indicators which can be divided into three main categories: Economic, Environmental, and Social. Some regions, nations, or states may adjust the verbiage slightly to accommodate their particular scenario. For example, the GPI template uses the phrase "Carbon Dioxide Emissions Damage" whereas the state of Maryland
uses "Cost of Climate Change" because it also accounts for other greenhouse gases (GHG) such as methane and nitrous oxide.



+ Personal Consumption Expenditures The bulk of GDP as well, consumption informs the baseline from which the rest of the indicators will be added or subtracted.

÷ Income Inequality Using the Gini index
Gini index
, published by World Bank, and the Income Distribution Index (IDI), its relative change over time.

(PCE/IDI)*100 Adjusted Personal Consumption Formula=(Personal consumption/IDI) x 100. Forms the base number from which the remaining indicators are added or subtracted.

- Cost of Consumer Durables Calculated as a cost to avoid double counting the value provided by the durables themselves.

+ Value of Consumer Durables Household appliances, cars, etc. are not used up in one year and are considered a part of household capital. Their value is depreciated over a number of years.

- Cost of Underemployment Encompasses the chronically unemployed, discouraged workers, involuntary part-time workers and others with work-life restraints (lack of childcare or transportation).

+/- Net Capital Investment Capital investment in foreign markets minus incoming investments from other countries. If lending (+) if borrowing (-).


- Cost of Water Pollution
Damage to water quality from things such as chemicals or nutrients, and the costs of erosion/sedimentation in waterways.

- Cost of Air Pollution
Includes damage to vegetation, degradation of materials, cost of clean-up from soot or acid rain, and resulting reduced property values, wage differentials and aesthetics.

- Cost of Noise Pollution
Noise from traffic and factories can cause hearing loss and sleep deprivation.

- Loss of Wetlands Valuates the services given up when wetlands are lost to development i.e. buffering of weather, habitat, water purification.

- Loss of farmland, soil quality or degradation Due to urbanization , soil erosion and compaction . This indicator is measured cumulatively to account for all years of production lost as it compromises self-sufficient food supply.

- Loss of Primary Forest and damage from logging roads Loss of biodiversity , soil quality, water purification , carbon sequestration , recreation etc. Cumulative affect year over year.

- CO2 Emissions Increases in severe weather is causing billions in damages. A value of $93USD/metric ton of CO2 emitted is used, based on a meta-analysis study by Richard Tol (2005) of 103 separate studies of costs of economic damages.

- Cost of Ozone Depletion Our protective layer in the atmosphere. Depletion can lead to increased cases of cancer, cataracts and plant decline. Weighed at $49,669USD/ton

- Depletion of Non-Renewables These cannot be renewed in a lifetime. Depletion is measured against cost of implementing and substituting with renewable resources.


+ Value of Housework and Parenting Child care, repairs and maintenance are valued equivalent to the amount a household would have to pay for the service.

- Cost of Family Changes Social dysfunction presents itself early in family life. Care is taken to avoid double counting goods and services duplicated due to split-parent households.

- Cost of Crime Medical expenses, property damages, psychological care and security measures to prevent crime are all included in this indicator.

- Cost of Household Pollution
Abatement Cost to residents to clean the air and water in their own household i.e. air and water filters.

+ Value of Volunteer Work Valued as a contribution to social welfare. Neighborhoods and communities can find an informal safety net through their peers and volunteer work.

- Loss of Leisure
Time Compared to 1969 hours of leisure. Recognizes that increased output of goods and services can lead to loss of valuable leisure time for family, chores or otherwise.

+ Value of Higher Education Accounts for the contribution resulting knowledge, productivity, civic engagement, savings, and health; a "social spillover," set to $16,000 per year.

+ Value of Highways and Streets Annual value of services contributed from the use of streets -webkit-column-width: 30em; column-width: 30em;">

* Broad measures of economic progress
Broad measures of economic progress
* Disability-adjusted life year
Disability-adjusted life year
* Economics
* Full cost accounting * Green national product * Green gross domestic product
Green gross domestic product
(Green GDP) * Gender-related Development Index * Global Peace Index
Global Peace Index
* Gross National Happiness
Gross National Happiness
* Gross National Well-being
(GNW) * Happiness economics * Happy Planet Index (HPI) * Human Development Index
Human Development Index
(HDI) * ISEW (Index of sustainable economic welfare) * Progress (history)
Progress (history)
* Progressive utilization theory * Legatum Prosperity Index * Leisure
satisfaction * Living planet index
Living planet index
* Law of social cycle * Millennium Development Goals
Millennium Development Goals
(MDGs) * Money-rich, time-poor * Post-materialism * Psychometrics * Subjective life satisfaction * Where-to-be-born Index
Where-to-be-born Index
* Wikiprogress * World Values Survey
World Values Survey


* ^ A B C D E Bensel, Terrence; Turk, Jon (2011). Contemporary Environmental Issues. Bridgepoint Education. 1935966154. * ^ "Beyond GDP International Conference" (PDF). OECD. Organisation for Economic Cooperation and Development. Retrieved 13 December 2014. * ^ "For the Common Good by Herman Daly & John Cobb Jr. - A Book Review by Scott London". scottlondon.com. * ^ "Initiative Details". iisd.org. * ^ Kubiszewski, Ida; Costanza, Robert; Franco, Carol; Lawn, Philip; Talberth, John; Jackson, Tim; Aymler, Camille (30 April 2013). "Beyond GDP: Measuring and achieving global genuine progress". Ecological Economics. 93: 57–68. doi :10.1016/j.ecolecon.2013.04.019 . * ^ Deaton, Angus. "Ph.D.". Gallup. Gallup. Retrieved 10 December 2014. * ^ Lawn, Philip A. (2003). "A theoretical foundation to support the Index of Sustainable Economic Welfare
(ISEW), Genuine Progress Indicator (GPI), and other related indexes". Ecological Economics. 44 (1): 105–118. doi :10.1016/S0921-8009(02)00258-6 . * ^ "GPI Atlantic". gpiatlantic.org. * ^ Alberta
GPI * ^ Mark Anielski * ^ Environment and Sustainable Development Indicators Initiative (Canada) * ^ Commissioner for the Environment and Sustainable Development (Canada) * ^ " Maryland
GPI Indicators". Maryland
Genuine Progress Indicator. MD DNR. Archived from the original on 2014-11-29. Retrieved 2014-10-21. * ^ "Genuine Progress Indicator". Genuine Progress: Beyond GDP. Genuine Progress. Archived from the original on 2014-10-21. Retrieved 2014-10-22. * ^ (http://www.gpiinthestates.org/states-using-gpi) * ^ "MD-GPI Background & Methodology". Maryland
Genuine Progress Indicator. MDDNR. Archived from the original on 28 November 2014. Retrieved 16 November 2014. * ^ " Maryland
Genuine Progress Indicator Overview". Maryland Genuine Progress Indicator. MD DNR. Archived from the original on 28 November 2014. Retrieved 16 November 2014. * ^ "Governor O’Malley Hosts GPI Summit". maryland.gov. * ^ * ^ "Energy and material flows". Docstoc.com. * ^ * ^ Goossens, Yanne. "Alternative progress indicators to Gross Domestic Product (GDP) as a means towards sustainable development" (PDF). European Parliament. Committee on the Environment, Public Health
and Food Safety (EVNI). Retrieved 27 September 2015. * ^ "Politiikanteon ohjaamiseen ei tarvita 'onnellisuusmittareita'", professor Mika Maliranta and research manager Niku Määttänen, Helsingin Sanomat
Helsingin Sanomat
2011-02-06, page C6 * ^ Canada planning applications * ^ Redefining Progress * ^ "Redefining Progress - Research and Publications". rprogress.org. * ^ Beyond GDP



* "Advantage or Illusion: Is Alberta's Progress Sustainable?" by Mark Anielski. Encompass Vol. 5, No. 5, July/August 2001. * "The Growth Consensus Unravels" by Jonathan Rowe. Dollars and Sense, July–August 1999, pp. 15–18, 33. * "Real Wealth: The Genuine Progress Indicator Could Provide an Environmental Measure of the Planet\'s Health" by Linda Baker. E Magazine, May/June 1999, pp. 37–41. * "The GDP Myth: Why 'Growth' Isn't Always a Good Thing" by Jonathan Rowe, and Judith Silverstein. Washington Monthly
Washington Monthly
, March 1999, pp. 17–21. * "Economic Issues" by Lusi Song, Troy Martin, and Timothy Polo. 4EM Taylor, May 28, 2008, pp. 1–3. * "Why Bigger Isn´t Better: The Genuine Progress Indicator - 1999 Update" by Clifford Cobb, Gary Sue Goodman, and Mathis Wackernagel, Redefining Progress, November 1999


* 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
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. * Costanza, R., Erickson, J.D. , Fligger, K., Adams, A., Adams, C., Altschuler, B., Balter, S., Fisher, B., Hike, J., Kelly, J., Kerr, T., McCauley, M., Montone, K., Rauch, M., Schmiedeskamp, K., Saxton, D., Sparacino, L., Tusinski, W. and L. Williams. 2004. "Estimates of the Genuine Progress Indicator (GPI) for Vermont, Chittenden County, and Burlington, from 1950 to 2000." Ecological Economics
51: 139-155. * 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. * Delang, C. O., Yu, Yi H. 2015. "Measuring Welfare
beyond Economics: The genuine progress of Hong Kong and Singapore". London: Routledge. * Fisher, I. , 1906. Nature of Capital and Income. A.M. Kelly, New York. * Hicks , J., 1946. Value and Capital , Second Edition. Clarendon, London. * Lawn, P.A. (2003). "A theoretical foundation to support the Index of Sustainable Economic Welfare
(ISEW), Genuine Progress Indicator (GPI), and other related indexes". Ecological Economics. 44: 105–118. doi :10.1016/S0921-8009(02)00258-6 . * Max-Neef, M. (1995). " Economic growth
Economic growth
and quality of life". Ecological Economics. 15: 115–118. doi :10.1016/0921-8009(95)00064-X . * 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


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