To replace GDP, our society needs an indicator that is “as clear and appealing as GDP, but more inclusive of environmental and social aspects of progress.” Broader indicators that make a more realistic attempt at measuring human progress and well-being already exist. The Human Development Index (HDI), published by the United Nations (UN) Development Program, began in 1990 and combines education and health with GDP to rank countries. The United States ranked 3rd in 2013, surprisingly high based on the statistics above. The Inclusive Wealth Index (IWI) includes natural capital and human capital (United States profile). Green GDP and the World Bank’s adjusted net saving indicator are also broad indicators. Other potentially useful indicators exist, as listed on this website. The following two papers provide excellent summaries of GDP criticisms and other measures of progress: “Beyond GDP: The Need for New Measures of Progress” and “Beyond GDP: New Measures for a New Economy.” While the HDI and the IWI are steps in the right direction, a still-developing indicator strikes a better balance between GDP data, social factors, and environmental degradation.
The Genuine Progress Indicator (GPI), whose advancement is currently led by the Center for a Sustainable Economy, is an excellent candidate to replace GDP. The GPI starts with the personal consumption expenditures data included in GDP and then adds or subtracts 25 other economic, environmental, and social factors. Environmental factors include the cost of air and water pollution, the loss of farmland, and the depletion of non-renewable resources. Social factors include the cost of crime, the cost of commuting, the value of housework and parenting, the value of highways and streets (“you didn’t build that”), and the value of volunteer work. A study comparing GPI to GDP shows a divergence in the two metrics as an economy grows, with GPI growing at a much slower rate. This report, by an economist currently implementing the GPI, further explains its methods and development.
