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The Case for New Measures of Growth and Prosperity

By Sean McGuire | October 6, 2011

CREDIT: Tara Hunt (CC).

In managing the Maryland Genuine Progress Indicator (MD-GPI), I am often asked a very simple question: Why? Why are we trying to put a monetary figure on things we all care about—spending time with our family, enjoying clean air and drinking water, volunteering in our community—when most people would consider them priceless?

Well, I think about this question a lot because honestly, I get asked it all the time! Why (and how) does one put a value on crime other than stolen property? The value of lost environmental benefits other than the wood we harvest? Of climate change other sea level rise? After much pondering and boiling the issue down to the bare bones, I have come to a conclusion—and it has nothing to do with treehugging.

The evidence was revealed while reviewing MD-GPI figures from 2008–2010, when we began to see the most dramatic effects of the national economic downturn. During that time, Maryland's Gross Domestic Product (MD-GDP) increased by 5.1 percent, but the sum of the seven economic indicators of the MD-GPI decreased 3.4 percent!!

What? Really?!? How can the measure touted on the evening news about economic conditions say we are improving, and yet basic economic measures are saying the exact opposite? We hear the national GDP is rising, but yet we're not feeling things getting much better. Clearly, there is a disconnect, and what we need are new measures.

So what are some of the current ways we gauge economic progress? One is personal consumption expenditures, which is the total money we all spend on stuff and services. Another is Gross Domestic Product, which is the market value of all final goods and services produced in a jurisdiction. Now, to be fair, these measurements do help explain our general spending activities. But, they have (at least) two fatal flaws.

First, they don't tell us what we're buying. On one hand, from the perspective of expenditures and GDP, if you buy a smartphone, an iTunes song, and a car… they say "Awesome"!! But on the other hand, if you're paying more for your medications and health care… they still say "Awesome"!! Replacing your stolen laptop… "Wonderful"!! Paying for that fender-bender on the road… "Fabulous"!!

This can't be a good measure of our economy—let alone our quality of life. Just because we're exchanging money doesn't mean we're happier. As a former professor of mine explained, these measures are like calculating the amount of money in your bank account by counting the number of times you go to an ATM.

The second flaw can be found in one word in the definition of GDP: "market." That is, GDP only measures that which has a market value. But what about important things that don't have a market value, such as pollution and waste? Sure, we pay for them (eventually), but not at the store counter. So it's not counted.

And what about non-market additions, like volunteering and stay-at-home parents? They're not counted either. But who would argue that there isn't incredible value in a stay-at-home parent?

And these critiques are just on the GDP and consumption expenditures. Similar cases can be made with other measures that fail to tell us the full story. These gauges only tell us how fast we're driving. They give us no guidance on where we're going. Instead, what we need is a "GPS" system for our quality of life.

That's where the Genuine Progress Indicator comes in. It adds a different set of measures—all academically sound—into the equation… an equation that often leaves critical elements out or does not recognize their interconnectivity. For instance, we hear about the widening gap between the rich and poor almost daily. But why is inequality never referenced in the same news story as economic growth? Better yet, why is it not included into the actual number we cite?! In Maryland, it is now.

Listen, we may not have the MD-GPI perfected. But after its second update, we're making it better. And we can wrangle over the value of an acre of wetland, and we can haggle over the cost of being stuck in traffic. But what we should not debate is that our current measures of economic conditions are often misused and misleading. And they certainly are not—and were never intended to be—a proxy for our well-being.

The MD-GPI provides a new lens that we should embrace if we are to alter our expectations. We should use it to institute policies that can guide and secure a path to a healthy, sustainable community we all know we can enjoy.

Republished from the Maryland Genuine Progress Indicator blog with kind permission.

Read More: Democracy, Development, Economy, Energy, Environment, Health, Jobs, Poverty, Sustainability, United States, Americas

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