Justice

Ecological Economics and Well-being

By Jolyon / 18 March 2009

GDP is often acknowledged to be a blunt instrument for measuring economic well-being and yet it is still used as a proxy measure for exactly that. One of the key problems with it seems to be that – unlike anything else in economics – there isn’t a separate column for cost and benefit. If someone buys a gun (total cost $150) and shoots someone, that person is hospitalized (total recovery cost $100 000), and the perpetrator is imprisoned (total cost $1 000 000) then GDP is up $1 100 150. If the damage and clean up were in the ‘cost’ column the net result to the well-being of the country should be negative $1 099 850. The same is true of environmental degradation caused by factory pollution, or any side effect of unsustainable practice weather they be social or environmental.

The New Zealand Center for Ecological Economics have been developing a Genuine Progress Indicator (GPI) for New Zealand That looks to take all of the externalities and costs into account. These include: health, overwork, air pollution, crime, and water quality.

For methodology and a full list of what is taken into account visit the website. New Zealand Center for Ecological Economics.

The GPI for New Zealand is nearly complete and due for release soon. (And not a moment to soon. The National Government has just cut funding to cycling and walking in favour of building more roads, presumably to get the economy moving.)

There are a number of countries that have a GPI indicator already complete. The results are interesting.

In each case at a certain point the GPI and GDP diverge. After that point a pursuit of GDP would seem to be a complete waste of time. An efficient economy that ‘manages the household’ well would be a better pursuit.

Is a focus change to GDI as an economic indicator as well as policy driver sufficient? If the mandate of the church is to become involved in the transformation of all society as part of a proclamation of good news, is pressing for the abandonment of a conscienceless GDP in favour of GDI a helpful direction? Does this have the ability to help the most marginalised and poorest in our society where a pursuit of unlimited growth doesn’t?