Measuring GPI

Majority of economists today look at country’s GDP to understand its economic well being. However, GDP was never intended to be used in such way.  Criticism for using GDP include that it does not account for the changes in natural capital, it does not take into consideration cost such as cost of unemployment,  overwork, crime,  transport and industrial accidents, problem gambling, cost of housework and many other.

GPI on the other hand (Genuine Progress Indicator) takes the above omitted costs into account.  So while GDP measures output only, GPI gives a much a better picture of real living standard. Still, GPI has its shortcomings as well. Many of the above mentioned costs are subjective and difficult to measure; it is difficult to assign appropriate economic value to them.  Hence I expect that it would be quite challenging for global economies to agree on specific international standard to use for measuring some of the GPI variables.

In searching for some answers on this topic, there does not seem to be a single defined standard for measuring GPI or a standard on variables to use. Rather, different countries and even provinces seem to decide separately on what are the most important costs to measure.  Imo, this approach makes sense to a certain extent. Considering differences in cultures, state of economic development and differences in wants and needs, it makes sense that decisions on what to count and how to measure it be left to individual nations. GPI as a measure of well-being can only be valuable if it truly measures things that matter. However, I believe there should also exist a baseline, a certain set of basic variables and measure specifications so that economies can be evaluated and compared in regards to the real well-being on their populations. If you are aware of certain standards, please do share the information.  Some good reads include GPIAtlantic web site (Genuine Progress Index for Atlantic Canada) and TheCanadianIndexOfWellbeing page.

In general, the important thing is to go beyond using GDP only, to start measuring environmental and social assets as well, and to focus on ensuring sustainable economy so we can leave Earth in a good state for generations to come.

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Posted in climate change, community, corporate sustainability, economic development, sustainable development, sustainable living

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