GENUINE PROGRESS
INDICATOR
CONTENTS OF THE GENUINE PROGRESS INDICATOR (GPI)
The GPI starts with the same personal consumption data the GDP is
based on, but then makes some crucial distinctions. It adjusts for
certain factors (such as income distribution), adds certain others (such
as the value of household work and volunteer work), and subtracts yet
others (such as the costs of crime and pollution). Because the GDP and
the GPI are both measured in monetary terms, they can be compared on the
same scale.
I. Crime & Family
Breakdown
Social breakdown imposes large economic costs on individuals and
society, in the form of legal fees, medical expenses, damage to
property, and the like. The GDP treats such expenses as additions to
well-being. By contrast, the GPI subtracts the costs arising from crime
and divorce.
II. Household &
Volunteer Work
Much of the most important work in society is done in household and
community settings: childcare, home repairs, volunteer work, and so on.
These contributions are ignored in the GDP because no money changes
hands. To correct this omission, the GPI includes, among other things,
the value of household work figured at the approximate cost of hiring
someone to do it.
III. Income
Distribution
A rising tide does not necessarily lift all boats -- not if the gap
between the very rich and everyone else increases. Both economic theory
and common sense tell us that the poor benefit more from a given
increase in their income than do the rich. Accordingly, the GPI rises
when the poor receive a larger percentage of national income, and falls
when their share decreases.
IV. Resource
Depletion
If today's economic activity depletes the physical resource base
available for tomorrow's, then it is not really creating well-being;
rather, it is just borrowing it from future generations. The GDP counts
such borrowing as current income. The GPI, by contrast, counts the
depletion or degradation of wetlands, farmland, and nonrenewable
minerals (including oil) as a current cost.
V. Pollution
The GDP often counts pollution as a double gain; once when it's created,
and then again when it is cleaned up. By contrast, the GPI subtracts the
costs of air and water pollution as measured by actual damage to human
health and the environment.
VI. Long-Term
Environmental Damage
Climate change and the management of nuclear wastes are two long-term
costs arising from the use of fossil fuels and atomic energy. These
costs do not show up in ordinary economic accounts. The same is true of
the depletion of stratospheric ozone arising from the use of
chlorofluorocarbons. For this reason, the GPI treats as costs the
consumption of certain forms of energy and of ozone-depleting chemicals.
VII. Changes in
Leisure Time
As a nation increases in wealth, people should have increasing latitude
to choose between more work and more free time for family or other
activities. In recent years, however, the opposite has occurred. The GDP
ignores this loss of free time, but the GPI treats leisure as most
Americans do -- as something of value. When leisure time increases, the
GPI goes up; when Americans have less of it, the GPI goes down.
VIII. Defensive
Expenditures
The GDP counts as additions to well-being the money people spend just to
prevent erosion in their quality of life or to compensate for
misfortunes of various kinds. Examples are the medical and repair bills
from automobile accidents, commuting costs, and household expenditures
on pollution control devices such as water filters. The GPI counts such
"defensive" expenditures as most Americans do: as costs rather than as
benefits.
IX. Lifespan of
Consumer Durables & Public Infrastructure
The GDP confuses the value provided by major consumer purchases (e.g.,
home appliances) with the amounts Americans spend to buy them. This
hides the loss in well-being that results when products are made to wear
out quickly. To overcome this, the GPI treats the money spent on capital
items as a cost, and the value of the service they provide year after
year as a benefit. This applies both to private capital items and to
public infrastructure, such as highways.
X. Dependence on
Foreign Assets
If a nation allows its capital stock to decline, or if it finances its
consumption out of borrowed capital, it is living beyond its means. The
GPI counts net additions to the capital stock as contributions to
well-being, and treats money borrowed from abroad as reductions. If the
borrowed money is used for investment, the negative effects are canceled
out. But if the borrowed money is used to finance consumption, the GPI
declines. |
