Thursday, August 04, 2005

GDP v. GPI

The Genuine Progress Indicator
1950-2002 (2004 Update)
BY JASON ASON VENETOULIS ENETOULIS AND CLIFF LIFF COBB OBB
Sustainability Indicators Program
March 2004
http://redefiningprogress.org/newpubs/2004/gpi_march2004update.pdf

National accounting should be at
least as realistic as traditional
business accounting, so that
revenues and expenses are
differentiated. It should also be
more comprehensive, so that
economic policies harmonize full
employment, resource
conservation, and other social
goals instead of pitting them
against one another.


The first sentence in the above Quote is correct, as Economists should cease including remedial Costs as provision of Goods and Services. The list excluded would be that dismissed by the GPI (General Progress Indicator):


The GPI then subtracts three categories of expenses that do not improve
well-being:


1. defensive expenditures, defined as money spent to maintain the
household’s level of comfort, security, or satisfaction, in the face of
declines in quality of life due to such factors as crime, auto accidents, or
pollution. Examples include personal water filters, locks or security
systems, hospital bills from auto accidents, or the cost of repainting
houses damaged by air pollution.


2. social costs, such as the cost of divorce, crime, or loss of leisure time.

3. the depreciation of environmental assets and natural resources, including
loss of farmland, wetlands, and old-growth forests; reduction of stocks
of natural resources, such as fossil fuels; and damaging effects of wastes
and pollution.


The second sentence of the above Quote expresses why the GPI is dismissed in favor of the GDP by Economists. Volunteerism and Family life are social elements which would be basically maintained under any economic conditions. Placing a Dollar value upon these services only confuse the evaluation of the state of the economy. The associated Income Distribution values are very important, but such a Scale value does not supply information important to the health of the economy; much as Idealists adore Wealth Distribution schemes. The only Wealth Distribution scheme which is effective remains fair Tax rates without legislated Tax exemptions, Tax deductions, or Tax credits. lgl

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