Wednesday, June 8, 2011

The Genuine Progress

The Genuine Progress Index - a History

Since the Second World War, economic growth statistics based on the Gross Domestic Product (GDP) have been widely used as a proxy for societal wellbeing and prosperity. This was not the intention of those who created the GDP. Simon Kuznets, its principal architect, warned 40 years ago:
“The welfare of a nation can scarcely be inferred from a measurement of national income... Goals for “more” growth should specify of what and for what.”[1]
Simon Kuznets
Simon Kuznets (1901-1985)
GDP-based measures were never meant to be used as a measure of progress, as they are today. In fact, activities that degrade our quality of life, like crime, pollution, and addictive gambling, all make the economy grow. The more fish we sell and the more trees we cut down, the more the economy grows. Working longer hours makes the economy grow. And the economy can grow even if inequality and poverty increase.
The more rapidly we deplete our natural resources and the more fossil fuels we burn, the faster the economy grows. Because we assign no value to our natural capital, we actually count its depreciation as gain, like a factory owner selling off his machinery and counting it as profit.
Since the early 1970s, researchers, national statistical agencies, and international agencies like the World Bank, the Organisation for Economic Co-operation and Development (OECD), and the United Nations Statistical Agency have been working to produce more accurate and comprehensive measures of progress. These efforts were hampered by lack of appropriate data sets, particularly on indicators of social wellbeing and environmental and natural resource health, and by methodological challenges, such as weighting.
In the last 20 years, tremendous progress has been made in natural resource accounting, and in developing good social indicators, time use surveys, environmental quality measures, and other means of assessing wellbeing, sustainability, and quality of life. We are now completely capable of measuring our progress in a better way that accords with our shared values and lets us know whether we are moving towards the society we want to create.
After three California researchers developed a Genuine Progress Indicator (GPI) in 1995, incorporating 26 social, economic, and environmental variables, 400 leading economists, business leaders, and other professionals, including Nobel laureates, jointly stated:
“Since the GDP measures only the quantity of market activity without accounting for the social and ecological costs involved, it is both inadequate and misleading as a measure of true prosperity. Policy-makers, economists, the media, and international agencies should cease using the GDP as a measure of progress and publicly acknowledge its shortcomings. New indicators of progress are urgently needed to guide our society...The GPI is an important step in this direction.”[2]
The things we measure and count — quite literally — tell us what we value as a society and determine the policy agendas of governments. The Genuine Progress Index (GPI) presents a better way to measure our societal progress and wellbeing. The GPI assigns explicit value to environmental quality, population health, livelihood security, equity, free time, and educational attainment. It values unpaid voluntary and household work as well as paid work. It counts sickness, crime and pollution as costs not gains. The GPI can provide a more complete and accurate picture of how Canadians are really doing.

The GPI consists of two parts:

  1. the development of indicators and measures of progress.
  2. assessments of the economic value of non-market social and environmental assets not generally valued in the conventional economic statistics.
The GPI system and framework is based on a capital accounting framework, in which the value of human, social, and natural capital are recognized along with the manufactured and financial capital that are currently measured. Like conventional capital, this human, social, and natural capital is seen as subject to depreciation, and requiring re-investment in the event of depletion or degradation. Based on this approach, the GPI assesses the economic costs of liabilities like crime, pollution, sickness, and natural resource depletion, rather than counting defensive expenditures in these areas as contributions to prosperity (as current measures do).

Nova Scotia GPI Components
Time Use
• Value of Civic and Voluntary Work
• Value of Unpaid Housework and Child Care
• Value of Leisure Time
• Paid Work Hours
Living Standards
• Income and its Distribution
• Financial Security - Debt and Assets
• Economic Security Index
Natural Capital
• Soils & Agriculture
• Forests
• Fisheries and Marine Resources
• Energy
• Air
• Water
Human Impact on the Environment
• Solid Waste
• Ecological Footprint
• Greenhouse Gas Emissions
• Transportation
Human and Social Capital
• Population Health
• Costs of Crime
• Educational Attainment


Early GPIAtlantic Papers
The 2001 article Measuring Real Progress provides an in-depth examination of GPI vision and practice. Here also are the original GPIAtlantic documents.