Resource Depletion
If today’s economic activity depletes the physical resource base available for tomorrow, then it is not creating well-being; rather, it is borrowing it from future generations. The GDP counts such borrowing as current income. The GPI, by contrast, counts the depletion or degradation of wetlands, forests, farmland, and nonrenewable minerals (including oil) as a current cost.
Pollution
The GDP often counts pollution as a double gain: Once when it is created, and then again when it is cleaned up. By contrast, the GPI subtracts the costs of air and water pollution as measured by actual damage to human health and the environment.
Long-Term Environmental Damage
Climate change, ozone depletion, and nuclear waste management are long-term costs arising from the use of fossil fuels, chlorofluorocarbons, and atomic energy, respectively. These costs are unaccounted for in ordinary economic indicators. The GPI treats as costs the consumption of certain forms of energy and of ozone-depleting chemicals. It also assigns a cost to carbon emissions to account for the catastrophic economic, environmental, and social effects of global warming.
Changes in Leisure Time
As a nation becomes wealthier, people should have more latitude to choose between work and free time for family or other activities. In recent years, however, the opposite has occurred. The GDP ignores this loss of free time, but the GPI treats leisure as most Americans do—as something of value. When leisure time increases, the GPI goes up; when Americans have less of it, the GPI goes down.
Defensive Expenditures
The GDP counts as additions to well-being the money people spend to prevent erosion in their quality of life or to compensate for misfortunes of various kinds. Examples are the medical and repair bills from automobile accidents, commuting costs, and household expenditures on pollution control devices such as water filters. The GPI counts such "defensive" expenditures as most Americans do: as costs rather than as benefits.
Lifespan of Consumer Durables & Public Infrastructure
The GDP confuses the value provided by major consumer purchases (e.g., home appliances) with the amount Americans spend to buy them. This hides the loss in well-being that results when products wear out quickly. The GPI treats the money spent on capital items as a cost, and the value of the service they provide year after year as a benefit. This applies both to private capital items and to public infrastructure, such as highways.
Dependence on Foreign Assets
If a nation allows its capital stock to decline, or if it finances consumption out of borrowed capital, it is living beyond its means. The GPI counts net additions to the capital stock as contributions to well-being, and treats money borrowed from abroad as reductions. If the borrowed money is used for investment, the negative effects are canceled out. But if the borrowed money is used to finance consumption, the GPI declines.
If today’s economic activity depletes the physical resource base available for tomorrow, then it is not creating well-being; rather, it is borrowing it from future generations. The GDP counts such borrowing as current income. The GPI, by contrast, counts the depletion or degradation of wetlands, forests, farmland, and nonrenewable minerals (including oil) as a current cost.
Pollution
The GDP often counts pollution as a double gain: Once when it is created, and then again when it is cleaned up. By contrast, the GPI subtracts the costs of air and water pollution as measured by actual damage to human health and the environment.
Long-Term Environmental Damage
Climate change, ozone depletion, and nuclear waste management are long-term costs arising from the use of fossil fuels, chlorofluorocarbons, and atomic energy, respectively. These costs are unaccounted for in ordinary economic indicators. The GPI treats as costs the consumption of certain forms of energy and of ozone-depleting chemicals. It also assigns a cost to carbon emissions to account for the catastrophic economic, environmental, and social effects of global warming.
Changes in Leisure Time
As a nation becomes wealthier, people should have more latitude to choose between work and free time for family or other activities. In recent years, however, the opposite has occurred. The GDP ignores this loss of free time, but the GPI treats leisure as most Americans do—as something of value. When leisure time increases, the GPI goes up; when Americans have less of it, the GPI goes down.
Defensive Expenditures
The GDP counts as additions to well-being the money people spend to prevent erosion in their quality of life or to compensate for misfortunes of various kinds. Examples are the medical and repair bills from automobile accidents, commuting costs, and household expenditures on pollution control devices such as water filters. The GPI counts such "defensive" expenditures as most Americans do: as costs rather than as benefits.
Lifespan of Consumer Durables & Public Infrastructure
The GDP confuses the value provided by major consumer purchases (e.g., home appliances) with the amount Americans spend to buy them. This hides the loss in well-being that results when products wear out quickly. The GPI treats the money spent on capital items as a cost, and the value of the service they provide year after year as a benefit. This applies both to private capital items and to public infrastructure, such as highways.
Dependence on Foreign Assets
If a nation allows its capital stock to decline, or if it finances consumption out of borrowed capital, it is living beyond its means. The GPI counts net additions to the capital stock as contributions to well-being, and treats money borrowed from abroad as reductions. If the borrowed money is used for investment, the negative effects are canceled out. But if the borrowed money is used to finance consumption, the GPI declines.
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Why haven't we gone to the GPI metric already?
"In this Age of Deceit, it is a revolutionary act to tell the truth."
Why haven't we gone to the GPI metric already?
"In this Age of Deceit, it is a revolutionary act to tell the truth."
(series: end of part 1 - continued in part 2)
