New Economic Analysis To Measure Social, Environmental Costs

11/28/12 7:34AM By John Dillon
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Vermont is one of a few states that are beginning to analyze the economy by looking at the human and environmental impacts of spending decisions.

The measurement system, known as the Genuine Progress Indicator, is meant to supplement traditional metrics of economic growth, such as the gross domestic product.

The idea draws inspiration from Robert F. Kennedy, one of the first political leaders to point out that how we measure the economy doesn't always reflect society's values, or how real people live their lives.

In a March 1968 campaign speech, Kennedy took aim at traditional measurements of economic progress. The gross domestic product, Kennedy said, measures all spending. It includes the money used for nuclear warheads, the dollars spent to buy locks for doors, as well as for the jails to hold the criminals who break them.  

"The gross national product does not allow for the health of our children, the quality of their education or the joy of their play," he said. "It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. ... It measures everything, in short, except that which makes life worthwhile."

Four decades later, academics, and politicians have begun to take Kennedy's words to heart. Washington Progressive-Democratic Senator Anthony Pollina pushed the Legislature last winter to adopt a "genuine progress indicator." Pollina says the GPI will give lawmakers and the administration another statistical tool to assess budget decisions.

"Instead of just measuring the usual economic indicators which tell us how many things we made and how many things we bought and sold this actually helps us measure the impact on our lives, on our environment and on our social well being," he said.

The Gund Institute for Ecological Economics is developing the Vermont GPI. Earlier this week, lawmakers got an overview of the institute's progress.

Project coordinator Eric Zencey says the goal is to measure the cost or the benefit of various economic decisions. For example, if you want the GPI to assess the net loss of forest land in the state you should include the forest's role in providing clean water or other environmental benefits.

"Because GPI tries to go head to head with GDP, a dollar value is attached to the services of forests - the ecosystem services that are lost - for each acre that disappears," he says. "So each of these measurements has two components: a variable and a value."

Lawmakers agreed that they need another way to gauge the impact of their decisions. Bristol Democrat Dave Sharpe said he graduated from college in 1968 and joined what was then called the war on poverty. The gross national product has grown every year since, but by other measures, Sharpe says, the poverty war is being lost.

In a perfect world, this idea of a GPI overtakes the idea of a GDP in a kind of a lens decide through which we decide whether our country and our state is improving and we're all doing better," he says. "To me, that would be a significant step forward and it should affect budgeting."

The Legislature will get a report on the Genuine Progress Indicator in January. But it's not exactly clear how legislators will incorporate this new economic measurement tool into their decision-making.

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