Son of Five Rivers Blog

For the advancement of Entrepreneurship, Sustainability & the Ecology of Everyday Life

Genuine Progress Indicator (GPI)

The Genuine Progress Indicator (GPI) is a concept in green economics and welfare economics that has been suggested to replace gross domestic product (GDP) as a metric of economic growth.

GPI is an attempt to measure whether a country’s growth, increased production of goods, and expanding services have actually resulted in the improvement of the welfare (or well-being) of the people in the country. GPI advocates claim that it can more reliably measure economic progress, as it distinguishes between worthwhile growth and uneconomic growth.

The GDP vs the GPI is analogous to the difference between the gross profit of a company and the net profit; the Net Profit is the Gross Profit minus the costs incurred. Accordingly, the GPI will be zero if the financial costs of crime and pollution equal the financial gains in production of goods and services, all other factors being constan

Most economists assess the progress in welfare of the people by comparing the gross domestic product over time, that is, by adding up the annual dollar value of all goods and services produced within a country over successive years. However, GDP was never intended to be used for such purpose. It is prone to productivism or consumerism, over-valuing production and consumption of goods, and not reflecting improvement in human well-being.

Simon Kuznets, the inventor of the concept of the GDP, notes in his very first report to the US Congress in 1934:

…the welfare of a nation [can] scarcely be inferred from a measure of national income…

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November 30, 2009 - Posted by | Business Development, Economics, Finance | ,

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