The Genuine Progress Index. A better set of tools.

Can we create a genuinely sustainable economy? An economy that delivers prosperity without damaging the most valuable things on earth - like clean air and water, fertile soil, nurturing families, strong and vital communities?

We can't - unless we know how to balance the real costs and benefits of economic activity, including the costs that aren't at all obvious. An ill-managed pulp mill may bring jobs and profits, for example, but it also depletes the forest and sullies the river. Overtime work boosts production and incomes, but constant overtime infringes on family time and community life. We rarely evaluate such costs at all, even though we see them every day in the form of vanished fisheries, broken families, gridlocked cities, smog-filled air, drug abuse, and other social and environmental woes.

To build a sustainable economy, we need tools of analysis that properly value social, economic and environmental assets, tools that carefully appraise both costs and benefits, and balance them against one another. That's what's known as "full-cost accounting."

And that's what the Genuine Progress Index is designed to provide.

What's wrong with the tools we're using now?

Today, the most commonly-used measure of economic progress is still the Gross Domestic Product (GDP), which is simply the total value of all the goods and services that are exchanged for money.

The GDP literally does not count some of our greatest sources of wealth - unpaid household labour, volunteerism, and a clean environment, for example. Worse, the GDP doesn't distinguish between good things and bad ones - and it counts the depletion of our natural wealth as economic gain.

Crime, war, pollution, tobacco smoking, and car accidents all cause people to spend money - and so they all increase the GDP. The more trees we fell, the more fish we catch, the more fossil fuels we burn, the more greenhouse gases we emit, the more the GDP increases.

And the GDP only reports how much income we produce - but not how that income is distributed. So the GDP can increase even while the poor get poorer and the gap between rich and poor grows.

No wonder the GDP leaves citizens and policy-makers in confusion. If a rising GDP means that we're better off, why does it so often seem that things are getting worse?

The Genuine Progress Index, by contrast, is common-sense accounting. It counts beneficial activities as positive, and damaging activities as negative. So it provides far more sophisticated and accurate guidance for citizens and policy-makers alike - guidance which allows us to evaluate our activities, and change our behaviour accordingly.

GPIAtlantic: Welcome to the tool shop.

GPIAtlantic is a non-profit research and education organization that is creating a Genuine Progress Index for the small Canadian province of Nova Scotia. Over the past 10 years, GPIAtlantic has produced more than 80 carefully-researched reports on topics within the six main categories that make up the Genuine Progress Index - living standards, population health, time use, community vitality, education and environmental quality.

GPIAtlantic has produced ground-breaking research on the real costs and benefits of the province's energy consumption, transportation system, solid waste disposal, and air quality. It has analyzed Nova Scotians' working hours, obesity, tobacco use, and gambling habits. Its reports frequently cover subjects that have never been properly studied here before.

GPIAtlantic's research has uncovered some surprising facts. It revealed that volunteerism in Nova Scotia adds $1.9 billion to the provincial economy, for instance. It demonstrated that transportation, rather than shelter or health care or food, imposes the heaviest financial burden on Nova Scotian households - and that obesity and poor diet cost the province $250 million annually in health care costs and productivity losses.

Findings like these have changed the way that thoughtful Nova Scotians view their province. Applied globally, they can change the way that human beings view their world.

The Genuine Progress Index - a History

Since the Second World War, economic growth statistics based on the Gross Domestic Product (GDP) have been widely used as a proxy for societal wellbeing and prosperity. This was not the intention of those who created the GDP. Simon Kuznets, its principal architect, warned 40 years ago:

“The welfare of a nation can scarcely be inferred from a measurement of national income... Goals for “more” growth should specify of what and for what.”[1]

Simon Kuznets (1901-1985)

GDP-based measures were never meant to be used as a measure of progress, as they are today. In fact, activities that degrade our quality of life, like crime, pollution, and addictive gambling, all make the economy grow. The more fish we sell and the more trees we cut down, the more the economy grows. Working longer hours makes the economy grow. And the economy can grow even if inequality and poverty increase.

The more rapidly we deplete our natural resources and the more fossil fuels we burn, the faster the economy grows. Because we assign no value to our natural capital, we actually count its depreciation as gain, like a factory owner selling off his machinery and counting it as profit.

Since the early 1970s, researchers, national statistical agencies, and international agencies like the World Bank, the Organisation for Economic Co-operation and Development (OECD), and the United Nations Statistical Agency have been working to produce more accurate and comprehensive measures of progress. These efforts were hampered by lack of appropriate data sets, particularly on indicators of social wellbeing and environmental and natural resource health, and by methodological challenges, such as weighting.

In the last 20 years, tremendous progress has been made in natural resource accounting, and in developing good social indicators, time use surveys, environmental quality measures, and other means of assessing wellbeing, sustainability, and quality of life. We are now completely capable of measuring our progress in a better way that accords with our shared values and lets us know whether we are moving towards the society we want to create.

After three California researchers developed a Genuine Progress Indicator (GPI) in 1995, incorporating 26 social, economic, and environmental variables, 400 leading economists, business leaders, and other professionals, including Nobel laureates, jointly stated:

“Since the GDP measures only the quantity of market activity without accounting for the social and ecological costs involved, it is both inadequate and misleading as a measure of true prosperity. Policy-makers, economists, the media, and international agencies should cease using the GDP as a measure of progress and publicly acknowledge its shortcomings. New indicators of progress are urgently needed to guide our society...The GPI is an important step in this direction.”[2]

The things we measure and count — quite literally — tell us what we value as a society and determine the policy agendas of governments. The Genuine Progress Index (GPI) presents a better way to measure our societal progress and wellbeing. The GPI assigns explicit value to environmental quality, population health, livelihood security, equity, free time, and educational attainment. It values unpaid voluntary and household work as well as paid work. It counts sickness, crime and pollution as costs not gains. The GPI can provide a more complete and accurate picture of how Canadians are really doing.

The GPI consists of two parts:

1. the development of indicators and measures of progress.
2. assessments of the economic value of non-market social and environmental assets not generally valued in the conventional economic statistics.

The GPI system and framework is based on a capital accounting framework, in which the value of human, social, and natural capital are recognized along with the manufactured and financial capital that are currently measured. Like conventional capital, this human, social, and natural capital is seen as subject to depreciation, and requiring re-investment in the event of depletion or degradation. Based on this approach, the GPI assesses the economic costs of liabilities like crime, pollution, sickness, and natural resource depletion, rather than counting defensive expenditures in these areas as contributions to prosperity (as current measures do).

Nova Scotia GPI Components

Early GPIAtlantic Papers
The 2001 article Measuring Real Progress provides an in-depth examination of GPI vision and practice. Here also are the original GPIAtlantic documents.

GPI in the News – Media Coverage
Scroll back to 1997 to see how the notion of “Genuine Progess” has progressed over the years.

Notes:
1. Kuznets, Simon, The New Republic, October 20, 1962, cited in Cobb, Clifford, Ted Halstead, and Jonathan Rowe, “If the GDP is Up, Why is America Down?” The Atlantic Monthly, October, 1995, page 67.

2. Signatories include Robert Dorfman, Professor Emeritus, Harvard University; Robert Heilbroner, Professor Emeritus, New School for Social Research; Herbert Simon, Nobel Laureate, 1978; Partha Dasgupta, Oxford University; Robert Eisner, former president, American Economics Association; Mohan Munasinghe, Chief, Environmental Policy and Research Division, World Bank; Stephen Marglin and Juliet Schor, Harvard University; Don Paarlberg, Professor Emeritus, Purdue University; Emile Van Lennep, former Secretary General, OECD; Maurice Strong, Chair, Ontario Hydro, and Secretary General, Rio Earth Summit; and Daniel Goeudevert, former Chairman and President, Volkswagen AG. Full text and signatory list available from Redefining Progress, 1904 Franklin St., Oakland, CA 94612.