Download GEOG 352: Day 15

GEOG 352: Day 15
ALTERNATIVE MEASURES OF WELL-BEING
(CHAPTER 14)
Housekeeping Items
 Hope you had a good reading week. Did anyone go
to the Climate Change Symposium or to the film on
the Northern Gateway Project?
 Please see the poster on the ethical investment
symposium on March 10th. Can I see the people who
volunteered to present on my behalf after class?
 How are you making out on your research projects?
 Today I will give back the mid-terms and we can
review any questions. Can I also see Duncan and
Rabi after class?
Housekeeping Items
 After going over the exams, we will discuss Chapter
14 from Daly & Farley on alternative indicators of
social well-being.
 On Thursday we will talk about needs vs. satisfiers.
In the meantime, do a bit of introspection between
now and then as to what your personal human
nature is.
Alternatives to GNP/ GDP
 Don’t get too intimidated by this chapter. We are
only going to pluck out a few points. The authors
claim that ecological economics makes optimal
scale more important than economic growth.
This is followed by fair distribution as a
secondary, but very important, goal.
 They introduce GNP (“all production by
[domestic] citizens [and permanent residents]
whether at home or abroad”) and GDP (“all
production with the geographic borders [of a
country], whether by [residents] or by
foreigners”).
Alternatives to GNP/ GDP
 Another way of measuring GDP is the total value of
all goods and services produced by a nation in a
year(excluding imports). GDP= private consumption
+ gross investment + government spending +
(exports−imports).
 GDP per capita is adjusted for purchasing power
parity. According to Wikipedia, this is “how much
money would be needed to purchase the same goods
and services in two different countries.” To take the
example of housing, Country A could have a lower
GDP per capita than Country B, but its housing could
be far more affordable.
GDP Per Capita (PPP Adjusted), 2007
Alternatives to GNP/ GDP
 Typically, growth in GNP or GDP has been
seen as a reflection of society’s overall
economic and social well-being.
 Simon Kuznets, one of its developers,
warned Congress in 1934 that “the welfare of
a nation can scarcely be inferred from a
measurement of national income.” In 1962,
he was more explicit: “distinctions must be
kept in mind between quantity and quality
of growth. Goals of ‘more growth’ should
always specify more growth of what and for
what purpose.”
Alternatives to GNP/ GDP
 The critics who feel that GDP is an inadequate
measure of national well-being point to a number of
inclusions and omissions:
 It includes spending on various 'bads', such as
dealing with crime and its consequences; the health
consequences of air pollution, car crashes, smoking,
and junk food; spending on weapons and war, and
cleaning up after pollution and environmental
disasters (see p. 250)
 It ignores resource depletion and the degradation of
natural capital;
 It ignores the household and voluntary sectors;
 It doesn't examine economic inequality, and
 It fails to take into account quality of life issues.
Alternatives to GNP/ GDP
 Two key categories here of items that should be
subtracted from GDP/ GNP are natural resource
depletion and defensive expenditures.
 The first is rather obvious. The second is defined as
“those [expenditures] we have to make to protect
ourselves from the unwanted consequences of the
production and consumption of goods by other
people” (p. 270).
 This can range from individuals having to spend
money on asthma medication because of
transportation-related air pollution to governments
having to clean up abandoned mine sites or major oil
spills. In some cases – indeed, many – the full costs
are borne by future generations.
Alternatives to GNP/ GDP
 The authors also talk about the fact that GDP/ GNP
makes no distinction between truly sustainable income
and capital consumption. A store and all its
equipment, furniture and stock is the capital which
generates an income for its owner. If he or she
liquidates a part of that capital to subsidize a major
booze or cocaine binge, then they seriously undermine
their ability to derive an income in the future.
 Because of these weaknesses, a number of alternative
measures of social (and ecological) well-being have
been developed. These include: Gross National
Happiness, Happy Planet Index, Index of Sustainable
Economic Welfare and, more recently, the Genuine
Progress Indicator.
Alternatives to GNP/ GDP
 Measure of Economic Welfare (MEW)—The MEW is the
work of Yale University economists William Nordhaus and
JamesTobin. They developed their Measure of Economic
Welfare back in 1972 as one of the first attempts to address the
shortcomings of GDP.
 Index of Economic Well-being (IDEW) — This index is
the work of the Ottawa-based Centre for the Study of Living
Standards.It's a weighted average of four main components of
economic well-being: consumption flows, stocks of wealth,
inequality, and indicators of economic insecurity like
unemployment and poverty in old age.
 Genuine Progress Indicator(GPI)—The GPI was
developed in 1995 by Redefining Progress, a private research
institute based in California. It arrives at its Genuine Progress
Indicator by taking GDP figures and then adjusts them to take
into account income distribution, and other factors.
Alternatives to GNP/ GDP
 Index of Sustainable Economic Welfare (ISEW)—Developed in 1989
by Herman Daly and John Cobb, the ISEW takes into account private
spending on defence (a negative), domestic housework (a positive), the costs
of environmental harm (a negative), and it corrects for income inequality.
 Human Development Index (HDI)—This index is the work of the United
Nations Human Development Report. It ranks the world's countries on three
main aspects of human development: health, knowledge (education), and
standard of living.
 Happy Planet Index (HPI)—The Happy Planet Index was developed by
the British-based New Economics Foundation to, in their words, "show the
relative efficiency with which nations convert the planet's natural resources
into long and happy lives for their citizens.”
 Finally, in 1972, the King of Bhutan came up with the Gross National
Happiness (GNH) indicator that he felt would be in tune with his country's
Buddhist values.
Question for Discussion
 If you were wanting to evaluate how healthy and
happy a society is, how would you go about it?