U.S. Gross Production vs. Genuine Progress 1960-2004
Described by its authors, the Genuine Progress Indicator (GPI) provides citizens and policymakers fruitful insight by recognizing economic activity that diminishes both natural and social capital. Further, the GPI is designed to measure sustainable economic welfare rather than economic activity alone. To accomplish this, the GPI uses three simple underlying principles for its methodology: account for income inequality, include non-market benefits that are not included in the Gross Domestic Product, and identify and deduct bads such as environmental degradation, human health effects, and loss of leisure time.
The GPI developers identified 26 indicators and then populate them with verifiable data. As one example, the pure economic activity stemming from the explosive growth of urban sprawl contributes greatly to the GSP. Yet, along with sprawl come increased commuting time, increased traffic congestion, land use conversion, and automobile impacts. In short, just because we are exchanging money within an economy does not necessarily mean that we are sustainable or prosperous.
In the effort of the GPI to measure prosperity, though, there are of course inherent challenges. The most obvious is, how do we quantify the unquantifiable? First, what are the indicators of social well-being? Next, how do we calculate such indicators? That is, what really is the cost of crime? What is the value of wetlands? Of forests? How do we measure human health? To answer, while the identification of each indicator is subjective, the use of cited, nationally accepted data and peer-reviewed studies lends considerable credibility. Because of this and its long track record, many countries and national jurisdictions have used the GPI as a construct and included indicators and data to assist policymakers as they guide their communities to the future.
Origins of the GPI
The precursors to the current Genuine Progress Indicator were the Measured Economic Welfare (MEW) and the Index of Sustainable Economic Welfare (ISEW). In 1972, American economists William Nordhaus and Nobel Prize winner James Tobin developed the Measured Economic Welfare (MEW) in an attempt to answer if growth was obsolete. Ecological economist Herman Daly (currently at the University of Maryland, College Park) and theologian John Cobb picked up their work nearly two decades later as they investigated how to develop a macro measure of welfare by creating the Index of Sustainable Economic Welfare (ISEW).