Bye Bye GDP

One of the proposals for the future WE want is abolish GDP. Here are some alternatives:

The currently used measurements of how well our countries are doing are very limited. The question that we should ask ourselves is: what is Wealth anyway?

It takes us a long time to reconsider wealth. But the truth is that time is more than money and the richest people in the world might not be the ones with the biggest cars. It is also proven that equality is good for everyone. All of these realizations, however, are halted by the limited perception that is inherit to GDP.

The 3rd Happy Planet Index has just been published. It has been elaborated by the New Economics Foundation in collaboration with Friends of the Earth and the Soil Association.

Check this video explaining the Happy Planet Index:

The HPI is calculated through three separate measures: Experienced well-being: “If you want to know how well someone’s life is going, your best bet is to ask them directly. In this year’s HPI, experienced well-being is assessed using a question called the ‘Ladder of Life’ from the Gallup World Poll.”

Second is Life expectancy; Alongside experienced well-being, the HPI includes a universally important measure of health – life expectancy. We used life expectancy data from the 2011 UNDP Human Development Report.”

Finally, we have the Ecological Footprint which is an index itself. “The HPI uses the Ecological Footprint promoted by the environmental charity WWF as a measure of resource consumption. It is a per capita measure of the amount of land required to sustain a country’s consumption patterns, measured in terms of global hectares (g ha) which represent a hectare of land with average productive biocapacity.”

Here is an overview of this year’s ranking: In the green coloured countries two components are good and one middling whereas in the yellow ones one component is good and two are middling. Finally red and orange have no good component. Latin America is clearly the continent with the best overall Happy Planet Index followed by the Asia Pacific. The so-called developed world simply has a ecologic footprint which is too high to get a good score in the Happy Planet Index.

You can download the full report here.

Another alternative approach to wealth and wellbeing is the notion of “Inclusive Wealth”. The Inclusive Wealth Report will be published during the Rio+20 conference (no coincidence!). It “was developed on the notion that current economic production indicators such as gross domestic product (GDP) and the Human Development Index (HDI) are insufficient, as they fail to reflect the state of natural resources or ecological conditions, and focus exclusively on the short term, without indicating whether national policies are sustainable.” The IWR therefore tries to define the wealth of a nation by its capital assets “including manufactured, human and natural capital, and its corresponding values: the Inclusive Wealth Index (IWI).”

More on the notion of wealth:

We Want More More More

What Kuznets and his Followers Failed to Understand

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4 thoughts on “Bye Bye GDP

  1. When I undertook studying Economics (to get out of playing sport) last century I never quite got the hang of it all…(Bear markets…Bull markets…whats the deal with animal marketing?…) Gross Domestic Product was most probably the acronym that struck terror into my poor addled mathematically challenged brain the most. I remember my poor long suffering lecturer saying to me (3/4 through the year)…”Are you actually getting ANY of this?”…and when I replied in the negative he proceeded with “just look out the window over there and give me a yell if you get too bored”…he knew when to give up…its a pity that most economists seem unable to follow his esteemed suit and throw out the old measures and embrace the new. I was able to overcome my terror response whenever the subject of economic activity came up and now I am actually interested in economics (still no idea which is a bear and which is a bull market…my accountant son despairs of me lol 😉 ). If I can breach my lack of understanding…surely it couldn’t be so hard for chief economists to at least consider that there might just be another way…

    • Oh and I’m sure that people in school’s would enjoy “happy planet index” more than Gross Domestic Product? Somehow easier to embrace, no? I had similar disinterest in economics in school and only realized during my studies that it was a tool to understand why the world is so bad…

      • To me, Rahel, economics was a means to an end. I HATED sports and it was the only alternative to hurdles lol! I guess I should have gone with the sports?

      • 😀 Well, I would’ve definitely chosen sports at the time but there’s not choice in the Swiss school system: you gotta have it all. Somehow my teacher didn’t manage to pass the idea on to me that it had actually something to do with me…

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