Time to leave GDP behind

8122019 Time to leave GDP behind

httpslidepdfcomreaderfulltime-to-leave-gdp-behind 13

FUNDING Grant applicationsshould feature multimediapresentations p29983089

ASTRONOMY Planetarium showputs dark Universe at thecentre of the action p290

DEVELOPMENT Why policy-makers must admit thatwater is finite p288

REGULATION Data suggest theFDA is overcautious onconsumer genomics p286

can be estimated as can the effects of incomeinequality 2 The psychology of human well-being can now be surveyed comprehensivelyand quantitatively 34 A plethora of experi-ments has produced alternative measures ofprogress (see Supplementary Informationgonaturecombnquxn)

The chance to dethrone GDP is nowin sight By 2015 the UN is scheduled toannounce the Sustainable DevelopmentGoals a set of international objectives toimprove global well-being Developingintegrated measures of progress attachedto these goals offers the global commu-

nity the opportunity to define what

used GDP-style accounting it would aimto maximize gross revenue mdash even at theexpense of profitability efficiency sustain-ability or flexibility That is hardly smart orsustainable (think Enron) Yet since the endof the Second World War promoting GDPgrowth has remained the primary nationalpolicy goal in almost every country 1

Meanwhile researchers have becomemuch better at meas-uring what actuallydoes make life worth-while The environ-mental and social

effects of GDP growth

Time to leave GDP behindGross domestic product is a misleading measure of national success Countriesshould act now to embrace new metrics urge Robert Costanza and colleagues

R obert F Kennedy once said thata countryrsquos gross domestic prod-uct (GDP) measures ldquoeverything

except that which makes life worthwhilerdquoThe metric was developed in the 1930sand 1940s amid the upheaval of the GreatDepression and global war Even beforethe United Nations began requiring coun-tries to collect data to report national GDPSimon Kuznets the metricrsquos chief architecthad warned against equating its growthwith well-being

GDP measures mainly market trans-actions It ignores social costs environmental

impacts and income inequality If a business

I L L U S T R A T I O N B Y P E T E E L L I S D R A W G O O D C O M

NATURECOMFor more onsustainabledevelopment goals

gonaturecomttay983089n

1 6 J A N U A R Y 2 0 1 4 | V O L 5 0 5 | N A T U R E | 2 8 3

COMMENT

copy 2014 Macmillan Publishers Limited All rights reserved



sustainable well-being means how tomeasure it and how to achieve it Missingthis opportunity would condone growinginequality and the continued destructionof the natural capital on which all life onthe planet depends

DETHRONING GDP

When GDP was instituted seven decadesago it was a relevant signpost of progressincreased economic activity was creditedwith providing employment income andamenities to reduce social conflict and pre- vent another world war

But the world today is very different fromthe one faced by the global leaders whomet to plan the post-war economy in 1944in Bretton Woods New Hampshire Theemphasis on GDP in developed countriesnow fuels social and environmental insta-bility It also blinds developing countries topossibilities for more-sustainable models of

developmentSoaring economic activity has depletednatural resources Much of the generatedwealth has been unequally distributed lead-ing to a host of social problems5 The phi-losopher John Stuart Mill noted more than200 years ago that once decent living stand-ards were assured human efforts should bedirected to the pursuit of social and moralprogress and the increase of leisure not thecompetitive struggle for material wealth Oras the economist John Kenneth Galbraithonce observed ldquoTo furnish a barren roomis one thing To continue to crowd in fur-niture until the foundation buckles is quiteanotherrdquo

The limits of GDP are now clearIncreased crime rates do not raise livingstandards but they can lift GDP by raisingexpenditures on security systems Despitethe destruction wrought by the DeepwaterHorizon oil spill in 2010 and HurricaneSandy in 2012 both events boosted US GDPbecause they stimulated rebuilding

WEIGHING THE ALTERNATIVES

Alternative measures of progress can bedivided into three broad groups (see Sup-plementary Information) Those in the first

group adjust economic measures to reflectsocial and environmental factors The sec-ond group consists of subjective measuresof well-being drawn from surveys The thirdgroup relies on weighted composite indica-tors of well-being including housing lifeexpectancy leisure time and democraticengagement

Adjusted economic measures Theseare expressed in monetary units makingthem more readily comparable to GDPSuch indices consider annual income netsavings and wealth Environmental costsand benefits (such as destroying wetlands

or replenishing water resources) can also

be factored in One example is the genuineprogress indicator (GPI) This metric is cal-culated by starting with personal consump-tion expenditures a measure of all spendingby individuals and a major component ofGDP and making more than 20 additionsand subtractions to account for factors suchas the value of volunteer work and the costs

of divorce crime and pollution6

Crucially unlike other measures in thefirst group GPI considers income distribu-tion A dollarrsquos worth of increased incometo a poor person boosts welfare more thana dollarrsquos worth of increased income doesfor a rich person And a big gap between the

richest and the poor-est in a country mdash asin the United Statesand increasingly inChina and India mdashcorrelates with socialproblems including

higher rates of drugabuse incarceration and mistrust andpoorer physical and mental health5

These adjustments matter A 2013 study 2 comparing the GDP per capita and the GPIper capita of 17 countries comprising justover half the global population found star-tling divergences between the two metricsThe measures were highly correlated from1950 until about 1978 when they movedapart as environmental and social costsbegan to outweigh the benefits of increasedGDP (see lsquoGenuine progress flattensrsquo) Tell-ingly life satisfaction is highly correlated withGPI per capita but not with GDP per capita

Some governments are taking this seri-ously Two US states Vermont and Mary-land have in the past three years adoptedGPI as a measure of progress and haveimplemented policies specifically aimed atimproving it

Subjective measures of well-being Themost comprehensive of these is the WorldValues Survey (WVS) which covers about70 countries and includes questions abouthow satisfied people are with their livesStarting in 1981 the WVS is conductedin lsquowavesrsquo the sixth of which is currentlyin progress Another example is the gross

national happiness index used in BhutanThis measure uses elaborate surveys that askhow content people feel in nine domainspsychological well-being standard of livinggovernance health education community

vitality cultural diversity time use and eco-logical diversity

Subjective well-being has been highlystudied and has even been recommendedas the most appropriate measure of societalprogress7 But subjective indicators are trickyto compare across societies and cultures Forexample self-reported health tracks withclinically reported rates of morbidity and

mortality within countries but not across

them8 And people are not always aware ofthe things that contribute to their well-beingFew of us give credit to ecosystem servicesfor water supply and storm protection forexample

Weighted composite measures of severalindicators A comprehensive picture of sus-tainable societal well-being should integrate

subjective and objective indicators9

(seeSupplementary Information Figure S1) asthese measures begin to do One example isthe Happy Planet Index introduced by theNew Economics Foundation in 2006 Thismultiplies life satisfaction by life expectancyand divides the product by a measure of eco-logical impact

Other indices in the third group com-bine a range of variables such as incomehousing jobs health civic engagementsafety and life satisfaction The Better LifeIndex developed by the Organisation forEconomic Co-operation and Develop-

ment maintains a website that allows usersto choose how to weight variables revealinghow the emphasis on different variables caninfluence countriesrsquo rankings

Many other experiments are under way(see wwwwikiprogressorg) None of thesemeasures is perfect but collectively theyoffer the building blocks for somethingmuch better than GDP

WHY ARE WE STUCK

There is broad agreement that global societyshould strive for a high quality of life thatis equitably shared and sustainable Sev-eral groups and reports have concludedthat GDP is dangerously inadequate as ameasure of quality of life mdash including thosepublished by the French governmentrsquos 2008Commission on the Measurement of Eco-nomic Performance and Social Progress10the Frederick S Pardee Center for the Studyof the Longer-Range Future11 and the Euro-pean Commissionrsquos ongoing Beyond GDPinitiative That conclusion was also echoedin lsquoThe Future We Wantrsquo the declaration

GENUINE PROGRESS FLATTENSWorld GDP has soared since 1950 but a metric

for life satisfaction called GPI has not

Gross domesticproduct

2 0 0 5

U S $

( t h o u s a n d s ) p e r c a p i t a

Genuine progressindicator

1950

0

2

4

6

8

10

12

1960 1970 1980 1990 2000

S O U R C E R E F 2

2 8 4 | N A T U R E | V O L 5 0 5 | 1 6 J A N U A R Y 2 0 1 4

COMMENT

ldquoGDP isdangerouslyinadequateas a measureof quality ofliferdquo




of the 2012 Rio+20 UN Conference onSustainable Development agreed to by allUN member states

Nonetheless GDP remains entrenched1Vested interests are partly responsible For-mer US President Bill Clintonrsquos small movetowards a lsquogreen GDPrsquo which factored insome of the environmental consequences ofgrowth was killed by the coal industry How-ever much of the problem is that no alterna-tive measure stands out as a clear successor

Creating that successor will require a sus-tained transdisciplinary effort to integratemetrics and build consensus One poten-tial vehicle for doing this is the setting upof the UN Sustainable Development Goals(SDGs) a process that is now under wayto replace the Mil lennium DevelopmentGoals (MDGs) Established in 2000 theMDGs comprise eight basic targets thatinclude eradicating extreme poverty andestablishing universal primary educationgender equality and environmental sustain-ability Currently both the MDGs and thesuggested SDGs are only lists of goals with

isolated indicators But the SDG process canand should be expanded to include compre-hensive and integrated measures of sustain-able well-being12

If undertaken with sufficiently broadparticipation the hunt for the successor toGDP might be completed by 2015 There aresignificant barriers to doing this includingbureaucratic inertia and the tendency ofgovernments academia and other groupsto work in isolation These barriers can beovercome with dedicated leadership Cru-cially people can now communicate acrossthe globe with an ease unthinkable in the

days of Bretton Woods

Any lsquotop-downrsquo process must be supple-mented with a lsquobottom-uprsquo engagement ofcivil society that includes city and regionalgovernments non-governmental organi-zations business and other parties Werecently formed the Alliance for Sustain-ability and Prosperity (wwwasap4allcom)to do just that This web-based lsquonetwork ofnetworksrsquo can communicate research aboutsustainable quality of life and the elementsthat contribute to it (see SupplementaryInformation) and so help to build consen-sus among the thousands of groups nowconcerned with these issues

The successor to GDP should be a new setof metrics that integrates current knowledgeof how ecology economics psychology andsociology collectively contribute to estab-lishing and measuring sustainable well-being The new metrics must garner broadsupport from stakeholders in the comingconclaves

It is often said that what you measure iswhat you get Building the future we desirerequires that we measure what we want

remembering that it is better to be approxi-mately right than precisely wrong

Robert Costanza and Ida Kubiszewski are at the Crawford School of Public Policy Australian National University CanberraEnrico Giovannini is in the Departmentof Economics and Finance University ofRome Tor Vergata and minister of labourand social policies in the Italian governmentHunter Lovins is at Natural CapitalSolutions Longmont Colorado JacquelineMcGlade is at University College Londonand the United Nations Environment

Program Nairobi Kenya Kate E Pickett

is in the Department of Health SciencesUniversity of York UK Kristiacuten ValaRagnarsdoacutettir is at the Institutes of EarthSciences and Sustainable DevelopmentStudies University of Iceland ReykjaviacutekDebra Roberts is in the EnvironmentalPlanning and Climate ProtectionDepartment eThekwini MunicipalityDurban South Africa Roberto De Vogli is at the University of California DavisRichard Wilkinson is in the Division ofEpidemiology and Public Health Universityof Nottingham UKe-mail robertcostanzaanueduau

1 Van den Bergh J C J M J Econ Psychol 30 117ndash135 (2009)

2 Kubiszewski I et al Ecol Econ 93 57ndash68(2013)

3 Diener E amp Suh E M in Well-Being TheFoundations of Hedonic Psychology (edsKahneman D Diener E amp Schwarz N)434ndash450 (Russell Sage Foundation 2003)

4 Seligman M E P Flourish A Visionary NewUnderstanding of Happiness and Well-being (Atria 2012)

5 Wilkinson R G amp Pickett K The Spirit LevelWhy Greater Equality Makes Societies Stronger (Bloomsbury 2009)

6 Talberth J Cobb C amp Slattery N The GenuineProgress Indicator 2006 A Tool for SustainableDevelopment (Redefining Progress 2007)

7 Layard R Happiness Lessons from a New Science (Penguin 2005)

8 Barford A Dorling D amp Pickett K Social SciMed 70 496ndash497 (2010)

9 Costanza R et al Ecol Econ 61 267ndash276(2007)

10 Stiglitz J E Sen A amp Fitoussi J-P Report by theCommission on the Measurement of EconomicPerformance and Social Progress Vol 12(Commission on the Measurement of EconomicPerformance and Social Progress 2009)

11 Costanza R Hart M Posner S amp Talberth JBeyond GDP The Need for New Measures ofProgress (Boston University 2009)

12 Griggs D et al Nature 495 305ndash307 (2013)

Bhutan has measured citizensrsquo well-being using gross national happiness since 2008 (left) GDP has been in use since the 1944 Bretton Woods meeting (right)

L E F T I Z Z E T K E R I B A R I M L I M A G E G

R O U P E Y E V I N E R I G H T A B E F O X A P


COMMENT




sustainable well-being means how tomeasure it and how to achieve it Missingthis opportunity would condone growinginequality and the continued destructionof the natural capital on which all life onthe planet depends

DETHRONING GDP

When GDP was instituted seven decadesago it was a relevant signpost of progressincreased economic activity was creditedwith providing employment income andamenities to reduce social conflict and pre- vent another world war

But the world today is very different fromthe one faced by the global leaders whomet to plan the post-war economy in 1944in Bretton Woods New Hampshire Theemphasis on GDP in developed countriesnow fuels social and environmental insta-bility It also blinds developing countries topossibilities for more-sustainable models of

developmentSoaring economic activity has depletednatural resources Much of the generatedwealth has been unequally distributed lead-ing to a host of social problems5 The phi-losopher John Stuart Mill noted more than200 years ago that once decent living stand-ards were assured human efforts should bedirected to the pursuit of social and moralprogress and the increase of leisure not thecompetitive struggle for material wealth Oras the economist John Kenneth Galbraithonce observed ldquoTo furnish a barren roomis one thing To continue to crowd in fur-niture until the foundation buckles is quiteanotherrdquo

The limits of GDP are now clearIncreased crime rates do not raise livingstandards but they can lift GDP by raisingexpenditures on security systems Despitethe destruction wrought by the DeepwaterHorizon oil spill in 2010 and HurricaneSandy in 2012 both events boosted US GDPbecause they stimulated rebuilding

WEIGHING THE ALTERNATIVES

Alternative measures of progress can bedivided into three broad groups (see Sup-plementary Information) Those in the first

group adjust economic measures to reflectsocial and environmental factors The sec-ond group consists of subjective measuresof well-being drawn from surveys The thirdgroup relies on weighted composite indica-tors of well-being including housing lifeexpectancy leisure time and democraticengagement

Adjusted economic measures Theseare expressed in monetary units makingthem more readily comparable to GDPSuch indices consider annual income netsavings and wealth Environmental costsand benefits (such as destroying wetlands

or replenishing water resources) can also

be factored in One example is the genuineprogress indicator (GPI) This metric is cal-culated by starting with personal consump-tion expenditures a measure of all spendingby individuals and a major component ofGDP and making more than 20 additionsand subtractions to account for factors suchas the value of volunteer work and the costs

of divorce crime and pollution6

Crucially unlike other measures in thefirst group GPI considers income distribu-tion A dollarrsquos worth of increased incometo a poor person boosts welfare more thana dollarrsquos worth of increased income doesfor a rich person And a big gap between the

richest and the poor-est in a country mdash asin the United Statesand increasingly inChina and India mdashcorrelates with socialproblems including

higher rates of drugabuse incarceration and mistrust andpoorer physical and mental health5

These adjustments matter A 2013 study 2 comparing the GDP per capita and the GPIper capita of 17 countries comprising justover half the global population found star-tling divergences between the two metricsThe measures were highly correlated from1950 until about 1978 when they movedapart as environmental and social costsbegan to outweigh the benefits of increasedGDP (see lsquoGenuine progress flattensrsquo) Tell-ingly life satisfaction is highly correlated withGPI per capita but not with GDP per capita

Some governments are taking this seri-ously Two US states Vermont and Mary-land have in the past three years adoptedGPI as a measure of progress and haveimplemented policies specifically aimed atimproving it

Subjective measures of well-being Themost comprehensive of these is the WorldValues Survey (WVS) which covers about70 countries and includes questions abouthow satisfied people are with their livesStarting in 1981 the WVS is conductedin lsquowavesrsquo the sixth of which is currentlyin progress Another example is the gross

national happiness index used in BhutanThis measure uses elaborate surveys that askhow content people feel in nine domainspsychological well-being standard of livinggovernance health education community

vitality cultural diversity time use and eco-logical diversity

Subjective well-being has been highlystudied and has even been recommendedas the most appropriate measure of societalprogress7 But subjective indicators are trickyto compare across societies and cultures Forexample self-reported health tracks withclinically reported rates of morbidity and

mortality within countries but not across

them8 And people are not always aware ofthe things that contribute to their well-beingFew of us give credit to ecosystem servicesfor water supply and storm protection forexample

Weighted composite measures of severalindicators A comprehensive picture of sus-tainable societal well-being should integrate

subjective and objective indicators9

(seeSupplementary Information Figure S1) asthese measures begin to do One example isthe Happy Planet Index introduced by theNew Economics Foundation in 2006 Thismultiplies life satisfaction by life expectancyand divides the product by a measure of eco-logical impact

Other indices in the third group com-bine a range of variables such as incomehousing jobs health civic engagementsafety and life satisfaction The Better LifeIndex developed by the Organisation forEconomic Co-operation and Develop-

ment maintains a website that allows usersto choose how to weight variables revealinghow the emphasis on different variables caninfluence countriesrsquo rankings

Many other experiments are under way(see wwwwikiprogressorg) None of thesemeasures is perfect but collectively theyoffer the building blocks for somethingmuch better than GDP

WHY ARE WE STUCK

There is broad agreement that global societyshould strive for a high quality of life thatis equitably shared and sustainable Sev-eral groups and reports have concludedthat GDP is dangerously inadequate as ameasure of quality of life mdash including thosepublished by the French governmentrsquos 2008Commission on the Measurement of Eco-nomic Performance and Social Progress10the Frederick S Pardee Center for the Studyof the Longer-Range Future11 and the Euro-pean Commissionrsquos ongoing Beyond GDPinitiative That conclusion was also echoedin lsquoThe Future We Wantrsquo the declaration

GENUINE PROGRESS FLATTENSWorld GDP has soared since 1950 but a metric

for life satisfaction called GPI has not

Gross domesticproduct

2 0 0 5

U S $

( t h o u s a n d s ) p e r c a p i t a

Genuine progressindicator

1950

0

2

4

6

8

10

12

1960 1970 1980 1990 2000

S O U R C E R E F 2

2 8 4 | N A T U R E | V O L 5 0 5 | 1 6 J A N U A R Y 2 0 1 4

COMMENT

ldquoGDP isdangerouslyinadequateas a measureof quality ofliferdquo

































COMMENT

































COMMENT


Documents

Time to leave GDP behind