Genuine Progress Indicators
Noel Ortega, from the Institute for Policy Studies, hits the nail on the head when he points out that we get what we measure, in this article on living wealth indicators.
GDP doesn't measure well-being. It measures economic activity, to some degree. It doesn't reflect the state of our environment, our happiness or depression.
New indicators are being developed now. One example is the following:
Maryland Genuine Progress Indicator (GPI)
"The resulting interactive MD-GPI Model is much more than a simple list of indicators;
it is a dynamic tool that allows policymakers and citizens to watch how investments and decisions in one indicator affect and are affected by other indicators."
It will be of interest to watch the development of tools as these and see how and when governments decide to adopt these indicators. At least, some things are moving in the right direction.
Comment
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Comment by Martin Euser on February 5, 2012 at 7:27am
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Also, take a look on the NEF page titled Five ways to well-being.
connect, be active, take notice, keep learning, give and receive.
Life can be simple!
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Natural resources include, besides oil, gas and minerals: clean water, healthy air to breathe, fertile soil, etc.
The latter are not put on the balance sheet of a country. I don't know whether that is possible. However, there are measurable costs involved in purifying water, cleaning up the environment and so on. These costs can be estimated and put on a balance sheet. If we do that, we might scare the hell out of ourselves!
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Captain, you bring up some good points here. There have been several attempts at defining new indices for progress and the state of a country. The Happy Planet (composite) index has been developed by NEF. They got an award for this: the International Society for Quality-of-Life Studies’ Award for the Betterment of the Human Condition 2007. Explaining how the index is computed is too technical for this forum. I would have to explain z-scores, weighing procedures and some other stuff. However, I can say that data scores on a simple value scale from GALLUP for measuring life satisfaction have been used, along with other measures. The report on this can be found here. One can also sign the happy planet charter on that page. Organizations like theosnet could do that as well!
As to measuring depression, anxiety, etc., there are value scales for that as well, developed by psychologists. These measures could be included in a composite index. Basically, one can put almost anything in an index, as long as one can assign meaning to it.
The other question is about natural resources as capital. E.F. Schumacher stresses the fact that we squander the planet's resources. We do not factor these resources as capital on our balance sheets as far as I know. If you want to study this matter, it might be a good idea to check with NEF (neweconomics.org).
I found this institute through the booklet "Small is Beautiful in the 21st century" written by Diane Schumacher (who is married to the eldest son of E.F. Schumacher - the famous author of Small is Beautiful).
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Comment by Capt. Anand Kumar on February 4, 2012 at 10:28pm
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Thank You Martin. No doubt if we tried hard enough GPI will be refined further and replace GDP as the true measure of progress. I am sure the coming generations will be grateful to those individuals and organizations which are defining the new ways of analyzing our problems and offering solutions. However, looking at the Indicators provided in the link for the state of Maryland, I thought that two important metrics were not defined sufficiently.
First, what came to mind as the value of Lost Capital. For example, every time we take a mineral out of the earth, like crude oil or iron ore, we can never put it back. So, we must deduct its value from the balance sheet as consumption as well as from what is usually referred to as "Reserves and Surplus" in the balance sheet. Further, as this mineral resource will be processed and consumed across several countries how will it be possible to link that data to the state of Maryland alone.
Second point has been talked about but no conclusive methodologies have appeared as yet. How does one define and quantify the well being of a society? How is it possible to measure emotions like happiness, anger, depression etc., as there is economic costs associate with emotions.
Please tell us a little more about these things.
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