A Maze of Acronyms and a Profound Dilemma

A Maze of Acronyms

GPI, SEDA, SPI, HPI, HDI, LPI, ERHNI, SNI, ANS, ISEW, GNH, SSI, RCI, MEW, SEEA….Who knew there were so many proposals for alternatives (and supplements) to GDP?  Here they are written out:

  • Genuine Progress Indicator
  • Sustainable Economic Development Assessment
  • Social Progress Index
  • Happy Planet Index
  • Human Development Index
  • Legatum Prosperity Index
  • Environmentally Responsible Happy Nation Index
  • Sustainable National Income
  • Adjusted Net Savings
  • Index of Sustainable Economic Welfare
  • Gross National Happiness
  • Sustainable Society Index
  • Responsibility-Capacity Index
  • Measure of Economic Welfare
  • System of Economic Environmental Accounts

And this isn’t even all of them.  Over the past few weeks, I have been looking in varying degrees of depth at these measures, along with critiques of GDP.  Again, I have been surprised to find that there is so much out there – scholarly articles, websites, government commissions, nonprofit organizations (some of which don’t exist anymore which is sad!), and TED Talks…lots of TED talks. I keep re-realizing that that I won’t be able to read/look at it all (even though I knew this might happen).  That being said, I haven’t really tried to narrow the scope of my project.  Perhaps it has gotten even broader as I realize how intertwined GDP is with the concept of growth.  I find this really interesting, so I have allowed myself to take some tangents.

A Profound Dilemma

“Society is faced with a profound dilemma. To reject growth is to risk economic and social collapse. To pursue it relentlessly is to endanger the ecosystems on which we depend for long-term survival.” – Foundations for the Economy of Tomorrow by Tim Jackson (p. 210)

Growth here refers to economic growth, as measured by GDP.  It took me a while to come across a clear explanation for why our current system “needs” growth, but now it makes sense.  When innovation increases productivity, less workers are needed to produce the same amount of goods (or services), so there will be unemployment unless there is growth in the number of goods (and services) created.  Of course, it doesn’t have to be this way because we created the system.  Jackson and others propose alternatives to our traditional understanding of employment, including ideas such as lower working hours, a minimum income, and a greater focus on a service oriented economy.  According to Jackson, an economy without growth is possible, but it is still unclear what role GDP and alternative measures would play in this type of economy.

It has been interesting to see some of the many different directions that people take the critiques of GDP and GDP growth. Potential solutions to a profound dilemma exist, but certainly none of them are without challenges and unanswered questions.

The literature I have been reading comes from many different disciplines, including political science, sociology, psychology, and economics.  I was especially surprised to find so much of it coming from economics, until I realized that ecological economics is a whole different discipline from conventional economics and environmental economics. It seems like ecological economics recognizes that the human economy is part of the broader global ecosystem, and “natural capital” isn’t necessarily something that can be analyzed without taking this recognition into account. Wikipedia actually has some useful information here: https://en.wikipedia.org/wiki/Ecological_economics

Some ecological economists created this graph that I have come across several times.  GPI essentially attempts to subtract out the parts of GDP that are costs for society, so this indicates that global GDP growth since the 70s might not be beneficial overall.

gpigraph07

These are just a few examples of what I have been learning.  I still need to do a lot more piecing together of my notes, and probably fill in some gaps, but I hope to start working on my final paper pretty soon.  It certainly won’t be comprehensive in that it covers everything, but it will draw on a broad collection of research and ideas.

Comments

  1. Hello Jullia,
    This is an intriguing topic! From what little I know about GDP and alternatives to it, there seems to be no easy answer. Although I have heard of many measures to measure the well-being of nations, it seems difficult to find a link that would work so well as an indicator for economic growth due to the correlations of GDP with other aspects of nations ability to develop (e.g., the ability of nations to spend more money on R&D even if it is a smaller portion of their wealth). Although GDP expresses utility for economic development and comparison, I was wondering what areas are you looking at other than economics for comparison? Also, are you looking at any specific countries? This research sounds awesome!

  2. Hey Julia!
    This is so interesting! Before hearing about your research I really had no idea that there were alternate measures of global economies other than GDP. I had never even questioned the fact that GDP is used to determine development around the globe. I wonder if some of the lack of efficacy of other modes of measuring the economy stems from the general lack of knowledge by us lay people – i.e. not economists – about these other sources. Also, I would be really interested to hear more about the other forms of measuring the economy, their pros and cons, and what you and the academic community determine to be the best alternative to GDP.

  3. Hi Tyler,
    Thanks for your comment. Currently, economic growth essentially means GDP growth, so you are right that there is no other measure that can measure GDP growth than GDP itself. However, GDP is a relatively subjective measure of what defines “the economy.” For example, Adam Smith actually didn’t think that financial speculation or collecting interest should count as contributing to “wealth.” Additionally, many goods and services that we consider beneficial today are not counted in GDP because they are not part of the formal economy – childcare, cooking, gardening, and farming at home for example. In some countries that used to be more focused on subsistence farming (not counted in GDP), they have been encouraged to shift toward industry instead (counted in GDP). Often these industries produce goods that are exported to wealthier countries. But it still increases Gross Domestic Product because there is production occurring within the country. Is that “economic development?” Depends on how we define economic development. Perhaps the overall gains in the country could indeed contribute to their own research and development, but it is certainly not a given, especially since the wealth can end up concentrated in the hands of a few. Pakistan is one example of a growing “third world” economy that seemed great until it became apparent how unequal it was.
    Some of the attempts to re-frame the economy come from economics itself, others from sociology, and political science, and others from ecological economics, which I touched on in my post. There are a whole range of additional sociological and psychological indicators too.
    I haven’t been focusing much on specific countries, but Bhutan definitely is mentioned a fair amount because of their use of Gross National Happiness. Additionally, I have noticed that a lot of the research that has been done on alternative measures and economic systems seems to come from the UK.

  4. Hi Astraea!
    I definitely think that any change to the economic system will require more discussion and grassroots type movements outside of the economic profession. The experts can really only do so much! (But actually currently the most mainstream “experts” are doing quite a lot by not questioning GDP etc). I definitely have not come to a conclusion yet about the best alternative, but hopefully I’ll have some more, if limited, insights in future posts.

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