Media Clipping — Saturday, November 25, 2006, The Chronicle-Herald

GPI tests way we think about progress

By Roger Taylor

ONE SUSPECTS that a 565-page report on the sustainability of Nova Scotia's transportation system, to be released next week, will be filled with insights and questions that the average Nova Scotian rarely considers and political leaders will be struggling to deal with.

It is exactly the type of study Nova Scotia-based independent research group GPI Atlantic specializes in. GPI stands for Genuine Progress Index, which has been designed to go beyond traditional economic measures to point toward a more inclusive accounting system.

GPI Atlantic is planning for a Wednesday release of the GPI Transportation Accounts: Sustainable Transportation in Nova Scotia. It will attempt to answer questions like these: "How much does it really cost to drive a car or move freight by diesel truck? What costs are we not counting, like the cost of road accidents, air pollution, and free parking? Who pays all those costs, and who benefits from road transportation? Are we getting the best value for our dollars? Is our performance improving or worsening?"

The organization defines sustainability as meeting the needs of the present without compromising the ability of future generations to meet their own needs. GPI Atlantic's executive director, economist Ron Colman, says the transportation study is probably the most comprehensive accounting of the costs and impact of transportation ever conducted in this province. The final report is the culmination of three years of work on transportation in Nova Scotia.

It is but one of a number of independently produced studies that GPI Atlantic has created in the past several years, all aimed at testing traditional thinking on the economy.

Colman says there is already a very sophisticated system to calculate depreciation of manufactured capital but no comparable system for gauging the value of natural, social or human capital — although determining such values is just as crucial to the functioning of the economy.

"So if a forest degrades in quality, you could say it's depreciating in value," he says. "If fish stocks are depleted, then we could say our natural ocean capital is depreciated. Or if the health of the population were to decline, you could say that was a depreciation of human capital, which directly affects the economy."

In a recent meeting with The Chronicle-Herald editorial board, Colman said New Brunswick and Nova Scotia have the highest rates of sick days per employee in Canada. "So you know the depreciation of the human capital has a negative impact on the economy . . . If our streets are no longer as safe as they used be, we could say that was a depreciation of social capital, which again requires more resources — they have to install video cameras on Argyle Street . . . Those kinds of investments could be better spent in other places if crime would lower."

In other words, says Colman, it's common sense that we have a measure for various kinds of assets — natural, social and human, as well as manufactured ones.

"The GPI looks toward a set of measures of progress that try to assess social, economic and environmental health," he says. "But beyond that it is pointing toward a set of accounts that are more accurate, and in a way you could say that's essential for the efficient function of the market economy."

If prices don't reflect the true cost of production, he says, the economy is less efficient and government is likely to be needed to step in to regulate things.

"If the price of steel that comes out of Sysco (Sydney Steel) doesn't reflect the cost of production, then taxpayers are going to have to come in with a billion dollars afterward, and the heavy hand of government regulation, and clean up the mess," Colman says.

If pollution costs were properly reflected in the cost of production, he says, the market economy would be far more efficient and effective in self-regulation, and there would less need for government intervention.

All this talk about accounting for pollution seems to suggest a left-wing bent, but Colman makes an argument for this being an issue of both the right and left.

"I think that this can be embraced at every end of the political spectrum because, even from a purely market economic point of view, this is really a way of insuring the market economy is efficient," Colman says. "Right now it's not."

He says the research is not only negative, but also tries to account for benefits. "Something like volunteer work is . . . undervalued in our current accounting system because no money changes hands."

Gross domestic product, which has generally served as a measure of economic growth since the end of the Second World War, has been misused, says Colman.

"GDP, when used the way it was it was intended to be used, does its function really well," he says.

But when the architects of the GDP — Nobel laureate Simon Kuznets and others — developed it as a measure in the 1930s it was to help determine whether the United Kingdom was gearing up for the war effort. It was never intended to be used as a measure of progress, Colman says.

"I think if we had a more robust measure of progress and a more comprehensive set of accounts, it would put the GDP in its place and it would become less important and it wouldn't be quite the adrenalin rush that it is today," he says.

He questions whether spending on education and crime prevention should be given the same weight, as they are when GDP is used as the only measure of the quality of life.

"We never say abolish the GDP; the problem is the GDP is misused for a purpose it was never intended. That's the key thing: It was never intended to be a measure of well-being or of progress," Colman says.

( rtaylor@herald.ca )

Roger Taylor's column appears Tuesday, Wednesday, Friday and Saturday.

© 2006 The Halifax Herald Limited