Check out this month’s Nature magazine for an article from several members of ASAP’s steering committee on the need to move away from GDP and adopt a new set of metrics.
Gross domestic product (GDP) is a poor way to assess societal well-being. Pollution, crime, environmental destruction and inequality often accompany booming economic growth and leave people less well-off overall. GDP also blinds developing countries to more-sustainable models of development. The time has come for all countries to embrace new metrics, urge Robert Costanza and co-authors in a Comment piece in this week’s Nature.
More than a dozen alternative measures of progress have been developed, they explain. Some adjust economic measures for factors such as household work, income distribution, pollution and the depletion of natural capital; others rely on surveys of life satisfaction; still others combine indicators of health, income, living conditions and more variables.
Creating a successor to GDP requires a sustained, transdisciplinary effort to integrate metrics and build consensus, Costanza and colleagues write. They call for work that is already under way on the United Nations Sustainable Development Goals to be used in helping the global community to identify and adopt better measures of what makes life worthwhile. Failing to do so, they say, will “condone growing inequality and the continued destruction of the natural capital on which all life on the planet depends”.
The Nature article has created much interest in Iceland, with University of Iceland front page news, a newspaper article, a website article, and three radio interviews. What most people seem to be amazed over is that GDP actually is not a good measure of nation´s progress – and many are curious about the components of GPI (genuine progress indicator) and GNH (gross national happiness), to name just two. My take on this is that we need to do a lot better in explaining these new indicators. It would be great to hear from people in other countries. How can we make the new indicators that focus of people´s well-being and fairness more acceptable and more approachable?
Here is the link to the full Nature article:
I want to raise an issue about a weakness of GPI as a measure of “genuine progress”. Although the divergence between GDP per head and the GPI since the late 1970s tells us something important about the costs of economic growth, the GPI has a serious flaw if we want to maximise sustainable wellbeing. It implies that, but for the negatives it brings with it (from car crashes to pollution), the rest of economic growth would be as beneficial to us now as it ever was.
Although economic development is of course what has transformed the real quality of our lives, the signs are that, in terms of improvements in the really important aspects of human wellbeing, there are rapidly diminishing returns to growth as countries get richer. The curves of both life expectancy and happiness against GDP per head rise rapidly in the early stages of economic development and then begin to level off among middle income countries until, among the richest countries, further growth seems to bring no further benefits in terms of health or happiness.
Life expectancy in the rich countries continues to rise as fast as it has over the last 100 years, so the levelling off is not because we have reached the limits of human life expectancy. It is instead that increases in life expectancy – or happiness – no longer have any relation to growth. The implication is that growth continues to be important in poorer countries where many people still do not have access to basic necessities but, for people in the rich countries, having more and more of everything makes less and less difference. Although we continue to need innovation and change, it looks as if in the rich countries economic growth has largely finished its work of transforming the real quality of life.
The problem with the GPI is that it would be possible to get further increases in the GPI without real improvements in human wellbeing. If the sum of GDP less the ‘bads’ became positive again, showing that we had more stuff even after subtracting the negatives, that would appear to be “genuine progress”. But there is no reason to think it would actually have added anything to human health or happiness in the rich countries.
Of course individuals in rich countries all want more money to buy more stuff, but that is primarily about how we use consumption to serve status competition. And of course, at the societal level, individual status competition is a zero sum game. (And actually, if we look at psychological studies of individuals most into consumerism, status competition is considerably worse than a zero sum game!)
I think the reason why GDP remains so popular is political. It is both easy to measure and highly responsive to the few “knobs and buttons” that policy makers have to control the economy. To switch to a more complex metric could make it more difficult for politicians to assess the effectiveness of their policies (and to criticize those of competitors). Therefore, any credible substitute for GDP should (1) make it very easy for politicians to compare their performance with others, and (2) be almost instantly responsive to policy inputs.
You can find attached some supplementary information related to the ASAP article in last week’s Nature magazine.
ASAP is delighted our article in Nature has generated a lot of press coverage around the world. This all contributes to the ongoing debate about how to move to a new set of metrics which accurately reflect the world we are living in.
Let’s keep up the discussion!
Please find below a selection of some of the press coverage over the last few days (courtesy of the respective news organizations):
Business Insider Australia: http://www.businessinsider.com.au/canberra-professor-says-gdp-is-a-poor-economic-measure-heres-why-2014-1
The Post (South Africa): http://www.thepost.co.za/outdated-concept-of-gdp-expert-1.1632435#.UthuAGQW0Qs
shakhty.su (Russia): http://www.shakhty.su/world/news/2014/01/17/gdp/
Corriere Della Sera.it (Italy): http://numerus.corriere.it/2014/01/17/giovannini-e-altri-esperti-e-ora-di-superare-il-pil/
Fréttablaðið (Iceland): http://www.frettatiminn.is/tolublod/17_januar_2014
Culture Change: http://www.culturechange.org/cms/content/view/903/65/
University of Iceland: http://www.hi.is/frettir/leggja_til_nyja_maelikvarda_um_hagsaeld_thjoda
Morgunblaðið (Iceland): http://www.mbl.is/frettir/taekni/2014/01/16/audlindir_heimsins_eru_ekki_othrjotandi/
Bylgjan (Iceland): http://vefutvarp.visir.is/upptokur?itemid=23801
Nature.is (Iceland): http://natturan.is/frettir/7848/
Although the GPI is a step forward, is it really adequate? By some accounts, the population of the planet needs to be significantly reduced in order for the entire population to live at a reasonable standard of living while maintaining a sustainable relationship with the planet. According to The Global Footprint Network (http://www.footprintnetwork.org/), the planet can only support 1.5 billion people living at the European standard of living. Currently there are approximately 7 billion people. The reduction in population would appear to require a massive reduction in economic activity although also a large increase the well being indicators. Would the GPI or at least GPI per capita be able to capture that the global situation has dramatically improved by bringing economic activity back to a sustainable level?
I agree with some of the doubts surrounding GPI, including the fact that it requires us to monetize ‘assets’ that are not monetizable, with the risk of ending up putting a price on things that we should value per se. In some areas, like in natural capital accounting, this has already generated some paradoxes and speculation. What matters at this stage, I think, is the focus all our attention on ‘dethroning’ GDP and pushing statistical offices (and their governments) towards new dashboards that monitor economic development without turning everything into market prices. We need more ecological/carbon footprints, more statistics on time management and household activities. And we need the actual values, not the prices. To do so, we need to first unseat GDP. As GPI tries to ‘rectify’ GDP, it will in the end suffer from the same contradictions.
It would be interesting to get your view of what integrated indicators can at the same time maintain/restore natural capital and decrease inequality.