Project SSH.201162-1 290520
“European Framework for Measuring Progress” e-Frame
www.eframeproject.eu
SP1-Cooperation
Coordination and support actions (Coordinating actions)
FP7 SSH-2011-3
Grant Agreement Number 290520
SSH.2011.6.2-1
Deliverable D3.1
Dissemination level: PU BEHIND, BESIDE AND BEYOND THE GDP: ALTERNATIVES TO GDP AND TO MACRO-INDICATORS
Authors:
Mariateresa Ciommi – Chiara Gigliarano
Francesco Maria Chelli – Mauro Gallegati
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BEHIND, BESIDE AND BEYOND THE GDP: ALTERNATIVES TO GDP AND TO MACRO-INDICATORS Summary
In keeping with the specific WP3 objective and the task assigned to our group (T2: Alternatives to GDP and to macro-indicators), this repost intends to provide a state of the art in research on alternative measures to GDP. We specifically focus on synthesizing the most common indices suggested in the recent literature in this area.
The report consists of four chapters. The first includes a brief introduction and a description of both the overall project and the UNIVPM team involved. The second, Behind GDP, defines GDP from its introduction to the recent efforts made in overcoming its drawbacks as a measure of progress and well-being. The following chapter, “Besides and beyond GDP” introduces what are, in our opinion, the most relevant attempts of producing measures that go besides and beyond GDP indicators and proposing a taxonomy to categorize these indicators. The report ends with some recommendations on the desirable properties for indicators of well-being (Chapter Four: “Recommendations and related proposals”)
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Table of Contents
1. INTRODUCTION ...... 8
1.1. Description of the project ...... 8
1.2. Description of the team ...... 10
2. BEHIND GDP: ONE INDICATOR MANY AIMS ...... 14
2.1. What is GDP? ...... 14
2.1.1 How to measure GDP ...... 15
2.2. Historical background and evolution ...... 22
2.3. What does and does not GDP measure? ...... 25
2.4. Stiglitz- Sen-Fitoussi Commission ...... 27
2.4.1. The recommendationS of the Commission ...... 28
2.5. The implementation of the reccomandations of the Stiglitz-Sen-Fitoussi Commission...... 30
2.5.1. One year after Stiglitz-Sen-Fitoussi report ...... 30
2.5.2. Two years afteer Stiglitz-Sen-Fitoussi report ...... 34
2.5.3. Additional European Initiatives ...... 36
2.6. The evolution of measures related to GDP ...... 40
3. BESIDES AND BEYOND GDP ...... 44
3.1. A brief description of indicators beyond GDP ...... 45
3.2. Measures of well-being, progress and sustainability: Does an intersection exist?...... 63
3.3. The taxonomy of indicators ...... 70
3.3.1. Dashboard vs Composite Indicators ...... 78
3.3.2. Alternative to GDP vs Adjusting GDP indicators ...... 80
3.3.3. Subjective vs Objective indicators ...... 83
3.3.4. International vs Local ...... 85
3.4. Graphical representations ...... 88
4. RECOMMENDATIONS AND RELATED PROPOSALS ...... 92
4.1. Recommendation 1: Time Use ...... 93
4.2. Recommendation 2: Poverty and inequality ...... 94
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4.3. Reccomendation 3: Human Capital and Social Capital ...... 95
4.4. Recommendation 4: Vulnerability to poverty ...... 96
4.5. Recommendation 5: Unemployment ...... 97
4.6. Recommendation 6: Transfers in kind ...... 98
4.7. Recommendation 7: In real terms ...... 99
4.8. Recommendation 8: Happiness and subjective Well-being ...... 100
4.9. Recommendation 9: Household perspective ...... 101
4.10. Recommenation 10: Democratic partIcipation ...... 102
4.11. Recommendation 11: Small areas and regional dimensions ...... 104
4.12. Recommendation 12: Sub-group decomposability ...... 105
4.13. Recommendation 13: Subjective Weights ...... 106
4.14. Recommendation 14: Small Number of indicators for dashboard ...... 108
4.15. Recommendation 15: Monetary translation ...... 109
5. CONCLUSIONS ...... 111
ACKNOWLEDGEMENTS ...... 113
MAIN REFERENCES...... 114
WEB PAGES OF RELATIVE PROJECTS ...... 118
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We ought to combat the dominant conception whereby one single model of development and of its living (the model centered on the growth of marketable goods) is proposed and accepted as the only valid one. We ought to urge every population to seek the form of progress that matches better its history, its feature, its circumstances, and not to feel inferior merely because another country produces more goods. Today, although this may seem pure Utopia, one must nevertheless think about it
Giorgio Fuà, “Economic Growth”, 1993
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1. INTRODUCTION
1.1. DESCRIPTION OF THE PROJECT
Within the framework of the FP7 Work Programme 2011 on Socio-economic Science and Humanities, the e-Frame - European Framework for Measuring Progress - project builds on the latest political directives of the European Commission, giving particular attention to the priorities identified in the Europe 2020 strategy. The EU FP7 e-Frame project intends to foster the on-going debate on the measurement of well- being and progress of societies among all relevant stakeholders, developing a European network and supporting measurement initiatives promoted by National Statistical Institutes in this area. The 10 specific results, which must be achieved to meet the general objectives of the e-Frame project, are the following:
• Collecting and systematizing recent research results and practices concerning the measurement of progress and sustainable development;
• Addressing overarching and sectorial questions concerning the beyond GDP debate, through workshops, conferences and web platforms where researchers and practitioners will present their most updated results and where available information will be collected and shared;
• Feeding results of the debate into other similar initiatives, such as international trade and social reporting;
• Setting up a wide EU network composed of different relevant stakeholders (universities, research centres, enterprises, trade unions, policy makers, NSIs, civil society organizations) to address beyond GDP related issues within European policies in a coherent and coordinated way;
• Assessing future research needs and providing original European contributions to the OECD World Forums on Statistics, Knowledge and Policy;
• Proposing guidelines and actions to include stakeholders in indicator-related deliberative processes;
• Proposing guidelines for policymakers on the use of existing indicators (with special attention to European policies);
• Providing an inventory of software for disseminating statistics and formulating guidelines on their use by different stakeholders;
• Collecting NSIs practices on progress measurement and defining guidelines for coordinated future actions;
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• Defining operational proposals and a roadmap for FP8 and ESSnet; • Spreading the beyond GDP debate throughout Europe.
Project e-Frame is structured in 12 Work Packages (WP) covering four main areas of work (see Figure 1): 1. Stocktaking, aimed at compiling and documenting current knowledge on well-being, progress and sustainable development, with a few in-depth analysis of key issues; 2. Work on Tools, aimed at investigating and developing supporting instruments for progress measurement processes; 3. Networking, aimed at developing and enhancing ties among relevant stakeholders from various sectors, namely through web platforms, workshops and large conferences. 4. Communication and Dissemination, through international discussions at workshops, conferences, and widespread diffusion of project findings, results, guidelines and recommendations
Figure 1: Structure of the e-Frame Work Packages
Regarding Task 2 of Work Package 3, the UNIVPM (Università Politecnica delle Marche - Marche Polytechnic University) was charged with carrying out a stock-taking of alternative measures to GDP. This report presents the results of that task, including an analysis of a list of existing indicators to
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establish their basic characteristics, intentions, impacts and potential categorisations of a broad spectrum of Beyond GDP measures.
The main tasks attributed to the UNIVPM are the following: i) to analyse pros and cons of GDP. We will discuss about GDP being a flow and not a stock: as such it does not take into account the country’s specific endowments (its history, its characteristics, its conditions), but only its type of environment as an intangible asset. ii) to provide a state-of-the-art in research on alternative measures to GDP and a synthesis of scientific results from recent and on-going studies and to collect and assess key findings from recent literature in this area. iii) to provide suggestions and recommendations for further development of Beyond GDP indicators.
1.2. DESCRIPTION OF THE TEAM
UNIVPM (Università Politecnica delle Marche) ranks among the top Italian universities for teaching excellence. The Faculty of Economics "Giorgio Fuà" of UNIVPM was set up in Ancona in 1959 and soon achieved national renown on account of its innovative study programmes, the quality of its teaching staff, mostly brilliant young professors from well-established Universities and the wide range of its research (it published the first reconstruction of the Italian GDP since 1861). The Faculty, renamed Giorgio Fuà after its founder and a leading figure for more than 40 years, has consistently been placed amongst the top public universities in the country. The interdisciplinary faculty of the Department of Economics and Social Sciences (DISES) brings together economists, statisticians, econometricians and demographers. Research activities of DISES cover a wide range of topics: public finance, welfare measurement and income distribution analysis, Agent Based Modelling, household behaviour modelling, finance and monetary economics, economic development, international economics, public economic policy, statistical methods for economical analysis.
In the following we provide a short profile of the staff members who contributed to this report:
• Prof. Mauro GALLEGATI obtained his Ph.D. in Economics in 1989 at UNIVPM. He is professor of Economics at UNIVPM. He has been a visiting Professor in several Universities, including Stanford, MIT and Columbia. Mauro Gallegati is on the editorial board of several economic journals. His research includes business fluctuations, nonlinear dynamics, models of financial fragility and
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heterogeneous interacting agents. He is well known from his widely cited work with Joseph E. Stiglitz, developing the theory of asymmetric information and heterogeneous agents and their applications. He has been the principal investigator of 5 EU projects and of several national studies. His articles appear in leading journals on economics, alternative measures of GDP, economic history and history of economic analysis, nonlinear mathematics, applied economics, complexity and econophysics.
• Prof. Francesco M. CHELLI is full professor of Economic Statistics at UNIVPM. He has co-ordinated a number of Italian and European research projects and also the ISTAT group of research on “Methodologies for the classification of the territory”. His current research interests include: multivariate techniques for maps construction with socio-economic applications; poverty measurement; theory of economic and financial indicators in an axiomatic approach; scales of measurement and social indicators; derivation of consumer price indices.
• Dr. Chiara GIGLIARANO is assistant professor of Statistics at UNIVPM. She obtained her Ph.D. in Statistics in 2007 at the Bocconi University, was a visiting scholar at the Department of Economic and Social Statistics, University of Cologne, and has been a consultant for two Research Projects funded by the European Commission (“Accurate Income Measurement for the Assessment of Public Policies” and “EUROMOD Updating”). Her current research interests are: income distribution, multidimensional measurement of inequality, poverty and polarization, survival analysis, Bayesian nonparametric estimation.
• Dr. Mariateresa CIOMMI is a postdoctoral research assistant at the UNIVPM. She holds a European Ph.D in Economics (Doctor Europaeus) in 2012 from the University “G. d’Annunzio” Chieti-Pescara. She was a visiting scholar at the University of the Basque Country in Bilbao (Department of Applied Economics IV – Mathematics) and visiting member of the BRIDGE Research Group (Bilbao Research in Decisions Games and Economics). Her area of research interest lies in the measurement of diversity, inequality, poverty and welfare economics in a theoretical perspective.
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“We will never find a purpose for our nation nor for our
personal satisfaction in the mere search for economic well-
being, in endlessly amassing terrestrial goods. We cannot measure the national spirit on the basis of the Dow-Jones,
nor can we measure the achievements of our country on the basis of the gross domestic product (GDP).
Our gross national product counts air pollution and
cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors
and the jails for those who break them. It counts napalm and the cost of a nuclear warhead, and armored cars for
police who fight riots in our streets. It counts Whitman's rifle and Speck's knife, and the television programs which
glorify violence in order to sell toys to our children. Yet the
gross national product does not allow for the health of our children, the quality of their education, or the joy of their
play. 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
neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to
our country; it measures everything, in short, except that which makes life worthwhile.”
Robert F. Kennedy Lawrence, Kansas, March 18, 1968
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2. BEHIND GDP: ONE INDICATOR MANY AIMS
This chapter aims at defining the Gross Domestic Product and analysing the historical background that moved the attention from GDP to new measures of well-being, passing through the Stiglitz-Sen-Fitoussi report. In particular, the chapter starts off with a description of the three classical ways to compute GDP: the Production Approach, the Income Approach and the Expenditure Approach. We then provide an in-depth description of the historical evolution that led to the national accounts and to GDP in particular, starting from the first attempt to estimate the national account due to Petty in 1665 and ending with Kuznets (1934). We underline what are the limits of GDP, describing what GDP does not measure. Finally we introduce the Stiglitz-Sen-Fitoussi report, focusing on the implementation of their recommendations and presenting some of the most important European initiatives within the “Beyond GDP” debate.
2.1. WHAT IS GDP?
Gross Domestic Product (GDP) measures the monetary value of all final goods and services produced in a country in a given period of time. The word "Gross" means that GDP measures production regardless of the various uses to which that production can be put. In fact, production can be used for immediate consumption, for investment in new fixed assets, or for replacing depreciated fixed assets. The adjective "Domestic" specifies that GDP measures production that takes place within the country's borders. Let us specify all the terms used in the definition of GDP: monetary value refers to the fact that goods and services considered in the GDP definition are evaluated at current market price, that is at the price they are indeed sold; all, except for those commodities illegally produced and sold and those goods and services that are provided by self- (non-farm) production; final: flour is a final good when it is sold as flour, while it is an intermediate good if it is sold to a baker for making bread; produced: GDP measures the value of goods and services produced and not the transactions (brand- new cars that are sold and bought enter the GDP definition, while the sale of second-hand cars does not); in a country: GDP measures what is produced in Italy and not what is produced by the Italians (Italians may produce abroad, while in Italy foreigners may contribute to production).
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The main feature of GDP is that it measures only economic activities to which a price can be attributed. The size and growth of GDP reflect economic performance and are often used as headline indicators for the success and progress of a society. However, rising GDP does not imply that incomes of the worst-off, or of the majority of citizens, also rise. GDP has become a very popular indicator; consider that in January 2013 the word GDP was present in Google in more than 117.600.000 web-pages.
2.1.1 HOW TO MEASURE GDP
GDP can be computed following three alternative approaches: (i) the Production approach, (ii) the Income approach and (iii) the Expenditure approach. Of course, all these approaches should
give the same result. In practice, however, measurement errors will make the three figures slightly different when reported by national statistical agencies.
2.1.1.1 PRODUCTION APPROACH
According to the Production approach (also called Net product method or Value added method), GDP of country A in year t is defined as the market value of all final goods and services produced in country A during year t. To determinate the GDP value, it is necessary first of all to estimate the Gross Value of domestic Output (that is the value of the total sales of goods and services plus the value of changes in the inventories) in various economic activities, and then to evaluate the intermediate consumption (that is the cost of materials, supplies and services used to produce the final goods or services). The Net Value of Domestic Output is finally obtained as the difference between Gross Value and Intermediate Consumption. In synthesis, Net Value Added = Gross Value of output – Value of Intermediate Consumption The sum of Net Value Added in various economic activities is known as GDP at factor cost. Adding indirect taxes and subsidies on products gives the GDP at producer price.
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2.1.1.2 INCOME APPROACH
According to the Income approach, GDP is defined as the total sum of incomes of individuals
living in a country during year t. If GDP is calculated following this approach, it is sometimes called Gross Domestic Income (GDI). This method measures GDP by adding incomes that firms pay households for factors of production, wages for labour, interest for capital, rent for land and profits for entrepreneurship. Total income can be subdivided according to various schemes, leading to various formulae for GDP measured by the income approach. A common one is
Total income = COE + GOS + GMI, where:
• COE (Compensation of employees) measures the total remuneration to employees for their work. It includes wages and salaries, as well as employer contributions to social security and other similar payments;
• GOS (Gross operating surplus) is the surplus due to owners of incorporated businesses. Often called profits, although only a subset of total costs are subtracted from gross output to calculate GOS;
• GMI (Gross mixed income) is the same measure as GOS, but for unincorporated businesses. This usually includes most small businesses. The sum of COE, GOS and GMI is called total factor income; it represents the income of all factors of production in society and measures the value of GDP at factor prices. In order to obtain the GDP value, two adjustments must be made: first of all indirect taxes minus subsidies are added to move from factor cost to market prices and then depreciation is added to go from net domestic product to gross domestic product. Therefore, GDP is obtained as follows:
GDP = COE + GOS + GMI + TPI – SPI , where:
• TPI stays for Taxes on production and imports;
• SPI refers to Subsidies on production and imports. So adding indirect taxes on production and imports and subtracting subsidies on production and imports converts GDP at factor cost to GPI.
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2.1.1.3 EXPENDITURE APPROACH
The third way to calculate GDP for country A in year t is the so called Expenditure approach. This method takes into account all the expenditure incurred by individuals during year t. It considers the total expenditure of money used to buy things as a way of measuring production. According to this approach, GDP is defined as the sum of consumption, investment, government spending and net exports: GDP = C + I + G + (X − M) where:
• C (consumption) consists of final household consumption expenditure among the following categories: durable goods, non-durable goods, and services; it includes, for example, food, rent, jewelry, gasoline, and medical expenses but not the purchase of new houses. It usually represents the largest GDP component.
• I (investment) includes, for instance, business investment in equipment, but does not include exchanges of existing assets. Spending by households (not government) on new houses is also included in Investment. Investment in GDP does not mean purchases of financial products, since buying financial products is classed as saving, as opposed to investment.
• G (government spending) is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for military purposes, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits.
• X (exports) represents gross exports. GDP measures the amount of goods and services produced by a country, also including production for other nations. Exports are added.
• M (imports) represents gross imports. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic. Note that C, G, and I are expenditures on final goods and services; expenditures on intermediate goods and services do not count. (Intermediate goods and services are those used by businesses to produce other goods and services within year t). We observe that following this approach, if an object is self-made and then not sold, it does not get counted in determining GDP. This also applies for non-market provision of services (for example cooking, cleaning, child rearing, do-it yourself repairs). Determining GDP with this approach presents some problems, especially for economies that have shifted from production economies to service economies.
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There are some differences in these three approaches. The Expenditure approach is built on the principle that all products must be bought by somebody. This implies that the value of total production is considered equivalent to people's total expenditure for buying things. The Income approach is based on the principle that incomes from productive factors and the value of their product are equivalent. Therefore the final value of GDP is the sum of all producers' incomes.
2.1.1.4 DIFFERENT WAYS TO DEFINE GDP, DIFFERENT RANKINGS
The following figures provide some empirical evidences regarding GDP trends and comparisons of European countries and worldwide. Figures 2 and 3 show the trends of GDP at market price and of GDP per capita in purchasing power standard over the last twenty years for the major European economies (Germany, United Kingdom, France, Italy and Spain). Among the five countries, Germany has always had the highest GDP, followed by UK, France and Italy, while Spain has been characterized by the lowest GDP over the entire period of interest. The scenario changes completely when observing GDP per capita in purchasing power standard: Spain remains below the EU-27 average in each of the years considered, while the other four countries are clearly above average. In particular, Italy and France show a decline starting from year 2000, much sharper for the former than for the latter.
Figure 2: GDP trends for some EU countries (D, UK, E, F, I) from 1991 to 2012 (in million euros).
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Source: Eurostat Figure 3: Trends of GDP per capita in PPS for some EU countries (D, UK, E, F, I) from 1995 to 2010.
Source: Eurostat
Figure 4: GDP per capita at current market prices, year 2009 (EU-27=100).
Source: Eurostat
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Figure 4 shows the ranking of EU-27 countries1 in terms of GDP per capita for year 2009 compared to other developed countries. Among EU-27 countries, Luxembourg has the highest GDP per capita, while Romania and Bulgaria have the lowest values. Figure 5 instead compares the real GDP growth of EU-27 area, EA-16 area, Japan and United States from 1999 to 2009. For all “countries”, the yearly change of GDP was always positive until 2008, the year the world economic crises began.
Figure 5: Real GDP growth (% change compared with the previous year)
6
4
2
0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 -Percentage 2
-4
-6
EU-27 Euro area (EA-16) Japan United States
Source: Eurostat
The last two figures (Figure 6 and Figure 7) compare all the countries in the world in terms of their GDP value and GDP per capita in year 2011. It is interesting to note how the picture changes when moving from total GDP to GDP per capita (see, for example, Canada, Australia, Brazil,..).
1 The member states of European Union (year of entry) are the following: Austria (1995), Belgium (1952), Bulgaria (2007), Cyprus (2004), Czech Republic (2004), Denmark (1973), Estonia (2004), Finland (1995), France (1952), Germany (1952), Greece (1981), Hungary (2004), Ireland (1973), Italy (1952), Latvia (2004), Lithuania (2004), Luxembourg (1952), Malta (2004), Netherlands (1952), Poland (2004), Portugal (1986), Romania (2007), Slovakia (2004), Slovenia (2004), Spain (1986), Sweden (1995), United Kingdom (1973).
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Figure 6: Countries by 2011 GDP nominal per capita. (in dollars)
over $102,400 $12,800–25,600 $1,600–3,200 below $400
$51,200–102,400 $6,400–12,800 $800–1,600 unavailable
$25,600–51,200 $3,200–6,400 $400–800
Source: based on the IMF figures (2010-2011)
Figure 7: Countries by 2011 GDP nominal (in billion dollars)
Source: CIA World Factbook.
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2.2. HISTORICAL BACKGROUND AND EVOLUTION
The first work of political arithmetic appeared in England when the country was engaged in costly wars. A first estimation of national accounts was made in 1665 by William Petty in his Political
William Petty (27 May 1623 – 16 December 1687)
Petty was founder member of the Royal Society, inventor, statistician, naval architect, cartographer and political economist. He developed efficient methods to survey the land that was to be confiscated and given to Cromwell's soldiers. Petty is best known for economic history and statistic writings, pre-Adam Smith. Of particular interest were Petty's forays into statistical analysis. Petty's work in political arithmetic, laid the foundation for modern census techniques. Petty introduces in the first two chapters of Verbum Sapienti the first rigorous assessments of national income and wealth. To him, it was obvious that a country’s wealth lay in more than just gold and silver.
Arithmetic2.
In his work he introduced the concept of measure, maintaining that numbers, weights and measures are the only instruments suitable for evaluating produced resources. He proposed an estimation of produced resources based both on the per capita consumption and on the Gregory King (15 December 1648 – 29 August population. 1712)
Petty’s work was continued by King was genealogist, engraver, and statistician, best known for his “Natural and Political Observations and Gregory King at the end of the XVII century. Conclusions upon the State and Condition of England, 1696”, first published in 1801, which gives the best King prepared the first thorough system of available picture of England’s population and wealth at the end of the 17th century. A man of remarkable versatility, he national accounts with the stated purpose of edited the “Book of Roads”, for which he supervised the engravings (executing several himself), assisted in the comparing the economic consequences of a drawing of the map of London, and constructed the map of Westminster. long war with the budgets of the three main warring factions: England, Holland and France. Using data from fiscal studies and statistics based on international trade in England, he
2 Political Arithmetic was published posthumous, in 1690
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produced highly detailed assessments of the population and of the distribution of national wealth and income. Each year between 1688 and 1691, King presented a report on the English national income, national expenditure and the annual decrease of national wealth due to the war against the French King, Louis XIV. The main conclusion of economic policies was that if the war had continued, English heritage and tax collection would be dropped. King's analysis was unable to explain why, for instance, Netherlands’ assets continued to increase despite the war. In France, the first attempt to produce a consistent national account was the Dixme Royale written by Sébastien Le Prestre de Vauban in 1707, who was inspired by the desire to improve the
Sébastien Le Prestre de Vauban (15 May 1633 – 30 March 1707)
Vauban was a Marshal of France and the foremost military engineer Dismayed by the inefficiency of the French fiscal system, and deeply impressed with the deplorable condition of the peasantry whose labor he regarded as the main foundation of all wealth, Vauban's 1707 tract, Projet d'une dixme. royale, protested against the unequal incidence of taxation and the exemptions and privileges of the upper classes; the tract called for the repeal of all taxes and the imposition of a single 10% tax (dixme. royale) on all agricultural output (payable in kind) and on income from trade and manufactures, with no exemptions. He backed up his argument with a mass of statistics. His book was condemned by the royal government because it had been published without royal permission. Vauban spent the last weeks of his life trying to collect every copy that he had disseminated privately to friends and acquaintances.
efficiency of the tax system. After a brilliant beginning, the national accounts went through a slump at the turn of the XIX and XX century. The modern definition of GDP is coherent with the ancestral dichotomization of labour into productive and unproductive, introduced by Mercantilists and Physiocrats. Mercantilists defined labour carried out by exporter firms as productive labour and all the rest as unproductive while physiocrats considered agriculture as the only source of wealth of nations and, as a consequence, they termed labour produced in other industries as unproductive. However, both agricultural activities and non-trade activities contributed to the growth of
Adam Smith (June 1723 - 17 July 1790)
Adam Smith was a Scottish political economist and philosopher. In 1776 he published An Inquiry into the Nature and Causes of the Wealth of Nations, the first major work of political economy. The latter examined in details the consequences of economic freedom, such as division of labour, the function of markets, and the international implications of a laissez- faire economy.
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nations and it became difficult to explain growth which derived from activities defined as unproductive. In England, at the end of the eighteenth century, Adam Smith tried to redefine the concept of wealth of nations, establishing that it was not grounded only on agriculture, gold and silver but rather on the overall national production. He excluded government, law and finance, considered as unproductive as they did not yield a tangible product.
Karl Marx (5 May 1818 – 14 March 1883)
As one of the most original and influential thinkers of modern times, Karl Marx produced, with the aid of Friedrich Engels, much of the theory of modern socialism and communism.
In 1867, Marx published the first volume of Das Kapital in which he worked out a new theory of society. Marx showed that all social systems are economically motivated and change as a result of technical and economic changes in methods of production.
Karl Marx introduced a significant change in the
John Stuart Mill (20 May 1806 – 8 May 1873)
British philosopher and economist, the leading expositor of utilitarianism, cofounded with Jeremy Bentham. In the 1840s he published his great systematic works in logic and political economy, chiefly A System of Logic (2 vol., 1843) and Principles of Political Economy (2 vol., 1848). In 1859 he published On Liberty, a trenchant defense of individual freedom. His Utilitarianism (1863) is a closely reasoned attempt to answer objections to his ethical theory and to address misconceptions about it.
classification of activities as productive and unproductive. He shifted attention from labour to the worker, defining the worker’s labour as productive and self-employed labour as unproductive. Inspired by this innovative point of view, John Stuart Mill defined as unproductive any kind of labour that did not contribute to the accumulation of stocks or establish permanent benefits. It was at the beginning of the 20th century that Alfred Marshall recognized that production could not be effectively measured without taking into account the evaluation of individual consumer utilities. As a result, only transactions involving money or, in other words, everything that had a price, contributed to the gross domestic product. Reversely, every trade good was assumed to increase national well-being merely by the fact that it had been produced and bought.
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Alfred Marshall (26 July 1842 – 13 July 1924)
British economist, one of the founders of English neoclassical economics.
He reexamined and extended the ideas of classical economists such as Adam Smith and David Ricardo. His best-known work, Principles of Economics (1890), introduced several influential economic concepts, including elasticity of demand, consumer's surplus, and the representative firm. His writings on the theory of value proposed time as a factor in analysis and reconciled the classical cost-of-production principle with the theory of marginal utility.
The GDP measure and the underlying System of National Accounts3 is a relatively recent invention. With the Great Depression in 1929 it became absolutely necessary to have a measure of national accounts. In fact, before the mid-1930s, governments only had access to incomplete and sporadic data on the economy. It was only in 1934 that Simon Kuznets (1934, National Income,
Simon Smith Kuznets (30 April 1901 – 8 July 1985)
Kuznets was a Russian American economist at Harvard University who won the 1971 Nobel Memorial Prize in Economic Sciences "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development". Between 1927 and 1960 he worked as a member of the staff of the National Bureau of Economic Research. He investigated and worked mainly on national income and capital formation in the United States.
1929–1932, Senate document no.124, 73d Congress, 2d session), an Economist at the National Bureau of Economic Research in the United States, proposed a first set of national accounts.
2.3. WHAT DOES AND DOES NOT GDP MEASURE?
After its introduction by Kuznets, GDP has become a common measure with which to judge whether one country is better off than another on the basis of per-capita GDP levels. In particular, the rate of GDP growth is considered as an indicator of the pace of progress. GDP is a statistical tool which has, over time, been attributed with properties it does not possess. GDP should provide a measure of economic activities which can be priced. Its link with well-
3 see United Nations, 2003, Handbook of National Accounting: Integrated Environmental and Economic Accounting
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being is a recent interpretation: trying to measure well-being with GDP equals trying to extend the market principles to social life and “measuring space-time by liters or culture by kilos”. GDP is the sum of commodities and services produced in a given period of time in a country. As such, it does not consider the stocks (manufactured or natural: but see United Nations, 2003, Handbook of National Accounting: Integrated Environmental and Economic Accounting) and considers the exchange value (prices, or marginal value), not its total utility. It would be sufficient to say that GDP is not even a proxy of welfare. Simon Kuznets warned 50 years ago that: “The welfare of a nation can scarcely be inferred from a measurement of national income... “ Especially when the economy is developed and “goals for “more” growth should specify of what and for what” i.e. the quantity from the quality of the growth and the long term consequences (The New Republic, October 20, 1962, cited in Cobb, Clifford, Ted Halstead, and Jonathan Rowe, “If the GDP is Up, Why is America Down?” The Atlantic Monthly, October 1995, page 67). In 1974 Richard Easterlin introduced the happiness paradox: during the span of a lifetime, people’s happiness is uncorrelated with income and wealth changes (Easterlin R.A. (1974), Does Economic Growth Improve the Human Lot?, in P.A. David and M. W. Reder, eds, Nations and Households in Economic Growth: Essays in Honor of Moses Abramovitz, New York, Academic Press). According to Easterlin’s results, when income rises human happiness also does but only up to a certain point, beyond which it starts to decline. Easterlin’s evidence showed a very weak link: (i) between GDP and happiness, in that the less developed countries, i.e. those with lower GDP, are not significantly less happy than those with higher GDP; (ii) between income and happiness of people within a single country in a given moment (i.e. richest people are not the happiest); (iii) happiness depends quite insignificantly on wealth and income change.
As already mentioned, there are many items that GDP does not consider. In its computation, for instance, natural processes without human involvement are excluded. When calculating GDP, we ignore the effects of economic growth on the environment and even the fact that ecosystems provide us, at no cost at all, with services which at a price we then try to restore. It is not taken into consideration that these services, being without a market price, which means they are not tradable, are not counted in GDP, but end up in a net loss for future (and present) generations. These services – regulation of climate and atmospheric gases, decomposition and absorption of waste, flood control, soil formation, pollination, etc. – are invaluable and in no way could be replaced if they were degraded or irreversibly destroyed. Yet we distractedly observe the loss of biodiversity, deforestation and the consequent impact these have on the soil (erosion, slope
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instability, desertification, salinisation, etc.), the atmosphere (on climate regulation at different levels), and on human communities (mass migration due to desertification).
The following example4 could clarify the issue: the growth of trees in an uncultivated forest is not included in production, while the harvesting of trees from that forest is included. The Australian Bureau for Statistics tries to explain this, as follows: "The national accounts are primarily constructed to assist governments and others to make market-based macroeconomic policy decisions, including analysis of markets and factors affecting market performance, such as inflation and unemployment."5 From this point of view, all production that is far from the market or for which it is difficult to find a monetary value (or a price) is excluded. Thus all services provided free of charge by people to members of their family are excluded from the GDP. In particular, child rearing, meal preparation, cleaning, transportation, entertainment of family members, emotional support, care of the elderly are not involved in determining the final value of the GDP. Similarly, home-production for one’s own family use is also excluded. However, there are some exceptions. Since, by definition, non-market outputs do not have a market price, a value must be ascribed to them in order to determine GDP; it may be the value of a similar item that is sold on the market (a substitute) or, equivalently, the cost of goods and services used to produce them (i.e. Goods and services provided by governments and non-profit organizations free of charge). On the contrary, GDP counts for: goods and services produced for personal use by firms; costs of renovation and maintenance of the main residence incurred by owners; agricultural production for oneself or one's household consumption.
2.4. STIGLITZ- SEN-FITOUSSI COMMISSION
In February 2008, the President of the French Republic Nicholas Sarkozy invited Joseph Stiglitz, Amartya Sen and Jean Paul Fitoussi to establish a Commission with the aim of identifying the limits of GDP as an indicator of economic performance and social progress, including the problems with its measurement. Sarkozy asked the members of The Commission on the Measurement of Economic Performance and Social Progress (mainly, experts from universities, governmental and
4 See “Concepts and Methods of the United States National Income and Product Accounts”, United States Department of Commerce, Bureau of Economic Analysis, page 2-2 http://www.bea.gov/national/pdf/NIPAhandbookch1-4.pdf 5 Australian National Accounts: Concepts, Sources and Methods, 2000, section 4.4, http://www.abs.gov.au/AUSSTATS/[email protected]/MF/5216.0
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intergovernmental organizations from several countries6) to indicate what kind of information might be required for the construction of more appropriate indicators of social progress. On 14 September 2009 the Commission on the Measurement of Economic Development and Social Progress published its final report. A key message of the Commission was the need “to shift emphasis from measuring economic production to measuring people's wellbeing”. The report identified four target audiences: political leaders, policy makers, academics and civil society activists. The report included recommendations on three main issues: Material living conditions, Quality of life and Sustainability.
2.4.1. THE RECOMMENDATIONS OF THE COMMISSION
The Commission on the Measurement of Economic Performance and Social Progress report lays great emphasis on the multidimensional nature of well-being. Even if one of the aims of the Commission was to propose a new indicator capable of going beyond GDP, members did not propose either an indicator or a dashboard of indicators of well-being. Instead, they made 12 recommendations, grouped in three classes: the first set of recommendations focuses on suggestions on the development and improvement of measures related to the Gross Domestic Product. The authors refer to this chapter as Classical GPD Issues.
1. When evaluating material well-being, look at income and consumption rather than production.
2. Emphasize the household perspective.
3. Consider income and consumption jointly with wealth.
4. Give more prominence to the distribution of income, consumption and wealth.
5. Broaden income measures to non-market activities.
In particular, since well-being also depends on activities which are outside the market, it was suggested to evaluate performance by including these elements and to measure the services offered by the State depending not on their costs, as with GDP, but on their impact on the welfare of individuals. Moreover, since the quality of goods changes over time and new products are
6 The Commission was composed of 25 members (mainly economists), who included Joseph Stiglitz (Chair), Amartya Sen (Advisor to the Chair) and Jean Paul Fitoussi (Coordinator). Other members were: Bina Agarwal, Kenneth J. Arrow, Anthony B. Atkinson, François Bourguignon, Jean-Philippe Cotis, Angus S. Deaton, Kemal Dervis, Marc Fleurbaey, Nancy Folbre, Jean Gadrey, Enrico Giovannini, Roger Guesnerie, James J. Heckman, Geoffrey Heal, Claude Henry, Daniel Kahneman, Alan B. Krueger, Andrew J. Oswald, Robert D. Putnam, Nick Stern, Cass Sunstein, Philippe Weil. In addition, a group of Rapporteurs from INSEE, OFCE and OECD assisted the Commission, with Jean-Etienne Chapron (INSEE) as General Rapporteur.
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continuously introduced, price indices should take these aspects into account for a careful assessment of inflation.
The second subgroup refers to Quality of life:
6. Quality of life depends on people’s objective conditions and capabilities. Steps should be taken to improve measures of people’s health, education, personal activities and environmental conditions. In particular, substantial effort should be devoted to developing and implementing robust, reliable measures of social relations, political interest, and insecurity that can be shown to predict life satisfaction.
7. Quality-of-life indicators in all the dimensions covered should assess inequalities in a comprehensive way.
8. Surveys should be designed to assess links between the various quality-of-life domains for each person, and this information should be used when designing policies.
9. Statistical offices should provide information needed to aggregate across quality-of-life dimensions, allowing the construction of different indices.
10. Measures of both objective and subjective well-being provide key information about people’s quality of life. In their surveys statistical offices should incorporate questions which include people’s life evaluations, experiences and priorities.
Therefore, the level of non-material well-being can be measured by the importance of free time and need for social relationships (in terms of security or social exclusion of individuals). The last subgroup is focused on Sustainable development and Environment:
11. Sustainability assessment requires a well-identified dashboard of indicators. The distinctive feature of the components of this dashboard should be that they are interpretable as variations of some underlying “stocks”. A monetary index of sustainability has its place in this kind of dashboard but, in the current state of the art, it should remain essentially focused on economic aspects of sustainability.
12. The environmental aspects of sustainability deserve a separate follow-up based on a well-chosen set of physical indicators. In particular there is need for a clear indicator of our proximity to dangerous levels of environmental damage (such as those associated with climate change or the depletion of fishing stocks.)
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In addition to objective and subjective measures, it appears necessary to assess the indices of welfare sustainability over time, an area where environment is of primary relevance: the logic where only exchange values are considered must clearly be abandoned. Going beyond GDP does not mean engaging in the construction of a synthetic alternative indicator, but overcoming the logic of the market as a good in itself. Welfare measurement is not a purely technical problem because the very concept of welfare depends on the preferences and values of a society and of its individuals. So it makes little sense to compare the health of an economy by taking only one indicator: it is in this direction that the Stiglitz-commission moves. The Commission's recommendations do not propose an alternative synthetic indicator of GDP, but advocate a collection of statistical measures able to envelop social welfare. In the report, several school-text cases are mentioned, in which GDP growth and social welfare do not increase together: from production with pollution to the social cost of road accidents, from environmental disasters to the black economy.
2.5. THE IMPLEMENTATION OF THE RECCOMANDATIONS OF THE STIGLITZ-SEN- FITOUSSI COMMISSION
The great work of the Stiglitz-Sen-Fitoussi commission has influenced not only researchers but, more important, policy makers. Consequently, many National Institutes of Statistics have been involved in the implementation of the recommendations included in the report. In the following subsections, we introduce what happened one and two years after the report’s publication. In addition, we provide a list of the most relevant European Initiatives on the “Beyond GDP” debate.
2.5.1. ONE YEAR AFTER STIGLITZ-SEN-FITOUSSI REPORT
One year after publishing the report, the French National Institute of Statistics (INSEE) and the Service de l’Observation et des Statistiques du Commissariat Général au Développment Durable (CGDD-SOeS - observation and statistics directorate of the office of the Commissioner General for sustainable development), solicited by the French President, began to implement most of the recommendations.
In the first part of their Report the Commission focused on GDP measurement and suggested to address it from the perspective of households, especially the distribution of their consumption or
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income. This meant moving from a business perspective (production) to a household one. These recommendations are mainly relevant for national accounting and consequently influence the design of new indicators. The Carbon Footprint measure seems to take into consideration all these recommendations.
The second part of the report focused on quality of life, and the Commission suggested introducing subjective evaluation of well-being. They indicated that national accounts should include not only objective evaluations, but also subjective information such as social perception of the environment, perception of environmental risks and individual evaluation of the quality of life in housing (such as damp dwellings, noise, etc.). In order to take all these aspects into account, in July 2010, fifteen sustainable development indicators (denoted by SDI) were selected and adopted by the Comité interministériel du développement durable (CIDD - Interministerial Committee for Sustainable Development). The main point is that the SDI indicators can be interpreted as variations of some stock of capital used to assess human well-being and they reveal whether today’s growth is depleting the capital that future generations will need for tomorrow’s growth.
The Commissariat General au Development Durable in his Observation et Statistiques (Observation and Statistics) in September 2010 illustrated what has already been implemented and what has yet to be done. 7 We summarize their analysis in the following tables.
Table 1: GDP and related issues
Done and disseminated in 2009 and 2010 (1st half) Forthcoming
• R1 and R4: inequalities between households in • R2: 10 years evolution of households’ terms of income and consumption in national purchasing power per household category accounts • R3: a breakdown of households’ wealth • R2 and R4: taking into account social transfers in according to five household categories. kind (education, health, etc.) when assessing • R3: household inequalities of wealth inequalities • R2 and R5: taking into account households’ • R1, R2 and R4: evolution of inequalities in standard domestic activities as a complement to GDP, of living between 1996 and 2007; from time scheduling surveys • R2 and R3: national economic wealth in 2009; • R1, R2 and R4: evolution of very high incomes between 2004 and 2007 • R1 and R12: a new approach to household
7 For details, see: www.insee.fr
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Done and disseminated in 2009 and 2010 (1st half) Forthcoming
consumption from national accounts: CO2 emissions due to final household consumption per household category (jointly with CGDD-SOeS)
Table 2: Quality of Life
Done and disseminated Forthcoming
• R6: estimates of populations and housing • R6 and R7: knowledge of bad housing (Insee) exposed to natural hazards (CGDD-SOeS) • R6, R7 and R8: social participation, association • R6 and R8: surveys on social perception of the membership (Insee) environment, perception of risk and sensitivity • R6 to R9: objective measurement of quality of of French people to biodiversity (CGDD-SOeS) life (Insee) • R7 and R9: evolution of living standards, • R6, R7 and R9: time spent by households in their productivity and wellbeing over a long period different activities (work, leisure, domestic, etc.) (Insee). and how they perceive those activities (Insee) • R10: subjective appreciation of wellbeing (Insee)
Table 3: Sustainable development and environment
Done Forthcoming (2nd half 2010-2011)
• R11 and R12: a table of 15 Sustainable • R11: estimation of CO2 component of a Development Indicators for France is now household consumption basket (CGDD-SOeS, associated with the NSDS. Several key NSDS Ademe) indicators ‘can be interpreted as variations of • R11 and R12: 1st estimate of France’s ‘water underlying stocks’. Per capita material footprint’ using the same methodology as for consumption, carbon footprint of final demand, the carbon footprint (CGDD-SOeS) changes in common bird populations, and • R12: development of a territorial potential of expansion of land artificialisation.. These can biodiversity indicator (CGDD-SOeS, IGN, MNHN, constitute the foundation of a set of physical Dreif) indicators of environmental pressures. A joint • R11: work in progress on sustainable action commission of the ‘Governance at five’ development indicators (CGDD-SOeS and Insee) type and a national conference to define and on unpaid costs of depletion of natural sustainable development indicators resources (CGDD-SOeS) • R12: France’s ‘carbon footprint’: CO2 emissions • R11: report from Commission des comptes et de arising from final demand, including those due l’économie de l’environnement (Environmental to imports (CGDD-SOeS) accounts and economy Commission) on • R11 and R12: material consumption including economic drivers for conservation of biodiversity
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Done Forthcoming (2nd half 2010-2011)
that due to imports (CGDD-SOeS) R12: and ecosystem services (CGDD- Seeidd). compendium of biodiversity indicators (CGDD- SOeS) • R3 and R11: estimation of costs of environmental damage not borne by the economy: the case of global warming (CGDD- SOeS) • R11 and R12: An expert examination of the Ecological footprint (CGDD-SOeS) • R11: report on the biodiversity economy and environmental services (CAS) • R11: net adjusted savings and other approaches to sustainability, some theoretical bases (Insee)
Even if the impact on the French National Account system is greater than the impact on other countries’ national account systems (because, obviously, it was the President of the French Republic who invited outstanding scholars to investigate the limits of GDP as an indicator of economic performance and social progress), one year after the Commission’s Report, several governments tried to implement the Stiglitz- Sen-Fitoussi recommendations and several common initiatives are under way.
In particular:
• the Eurostat-Insee partnership with the National Statistical Institutes of 15 other EU countries. Four Task Forces have been established, three of which corresponding to chapters of the report and one dealing with coordination activities.
• the Sarkozy-Merkel request for a Franco-German report on the issue of ‘What is growth in the 21st century, what is prosperity for highly developed industrial nations?’.
• the OECD has incorporated the Stiglitz-Sen- Fitoussi report’s recommendations into its work programme and the green growth strategy.
• the United Nations Statistics Commission decided to add a ‘Stiglitz’ item to the agenda of its 2011 meeting.
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2.5.2. TWO YEARS AFTEER STIGLITZ-SEN-FITOUSSI REPORT
Two years after the Commission’s Report, economists, statisticians and politicians tried to involve also subjective indicators in the measurement of personal well-being. People were asked: “Do you like your job? How’s your health? Do you spend enough time each day with your children? Can you trust your neighbours? And how satisfied are you, overall, with your life?”. This meant that the requests made by Stiglitz, Sen and Fitoussi began to be taken into account.
A first attempt was proposed by the Organization for Economic Co-operation and Development (OECD). In their publication “How’s Life?” (2011) they focused on these and other questions, offering a comprehensive picture of what makes up people’s lives in 40 countries.
Figure 8: How are you feeling today? Percentage of people reporting more positive than negative emotions in a typical day, 2010
Source: OECD calculations based on Gallup World Poll
As stressed by the OECD Secretary-General Angel Gurría in his speech delivered at the Conference “Two Years after the release of the Stiglitz-Sen-Fitoussi Report” in Paris in October 2011, the OECD is “responding with a call for governments to adopt a two pronged strategy: “go structural”
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and “go social”. Reconciling long-term economic growth and people’s well-being can be achieved if structural policies focus on what matters most to people in advanced and less-advanced economies alike.”
As a consequence, in order that the Stiglitz-Sen-Fitoussi recommendations be implemented by all the National Statistical Offices and International Organisations, the OECD, launched in May 2011 the “OECD Better Life Initiative”, a first attempt to bring together internationally comparable measures of well-being for all OECD countries and other major economies. The idea of this initiative was to urge policy-makers to put, as their primary aim, the many facets of people’s lives, their needs, their aspirations and their feelings, also including inequalities in all life dimensions, in line with the Stiglitz-Sen-Fitoussi Commission recommendations. The pioneering idea of the Better Life Initiative is the introduction of an interactive tool that allows people to build “Your Better Life Index” by choosing from a dashboard of 11 dimensions (housing, income, jobs, community, education, environment, governance, health, life satisfaction, safety, work-life balance) those that are necessary, according to their personal experience and criteria, for a “better life”. This way they assign their own weights to each of the dimensions and comparisons can be made across 34 countries. The most important point stressed by this new type of indicator is that both subjective and objective aspects matter, as suggested in the Stiglitz-Sen-Fitoussi report.
A similar initiative, albeit at a national level, is the Italian project on measuring equitable and sustainable well-being, called BES (“Benessere Equo e Sostenibile”), launched in December 2010 by the National Council for Economics and Labour (CNEL) and the Italian National Institute of Statistics (ISTAT). Alongside analogue activities conducted by several countries (France, Germany, the United Kingdom, Canada, the United States, Australia, Ireland, Mexico, Switzerland and the Netherlands), the CNEL-ISTAT initiative tried to measure social well-being by using a selected group of high-quality statistical indicators identified by management representatives and civil society. In November 2011, they published the results of a survey carried out on 45000 people. What emerged was that the 79,9% of respondents agreed to put health as a priority (it received a score of 9.7 points out of 10). An adequate income was only in fourth place together with good relationships with family and friends (9.1 points out of 10).
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2.5.3. ADDITIONAL EUROPEAN INITIATIVES
In 1992 the UN Summit in Rio de Janeiro8 introduced the notion of sustainable development into policy debate, with positive consequences for the promotion of sustainable development indicators. The term “ sustainable development” was made popular in Our Common Future, a report published by the World Commission on Environment and Development (WCED) in 1987. Also known as the Brundtland report, Our Common Future included the classic definition of sustainable development: “development which meets the needs of the present without compromising the ability of future generations to meet their own needs” (WCED, p. 43).
Our Common Future, also known as the Brundtland Report, by the United Nations World Commission on Environment and Development (WCED) was published in 1987. It is considered as the first attempt to define the concept of sustainable development. Its targets were multilateralism and interdependence of nations in the pursuit of a sustainable development path. The Brundtland Commission Report recognised that human resource development in the form of poverty reduction, gender equity, and wealth redistribution was crucial to formulating strategies for environmental conservation, and also acknowledged the existence of environmental- limits to economic growth in industrialised and industrialising societies. As such, the Report offered analysis, broad remedies, and recommendations for a sustainable course of development within these societies. However, the Report was unable to identify the mode(s) of production that are responsible for degradation of the environment and, in the absence of analysing the principles governing market-led economic growth, the Report postulated that such growth could be reformed (and expanded); this lack of analysis resulted in an obfuscated-introduction of the term sustainable development.
In the last two decades, several studies have been published on alternative measures of well- being, quality of life, sustainable development and societal progress. As a result of these investigations, a large number of alternative measures have been proposed. No consensus has been
8 The United Nations Conference on Environment and Development (UNCED), also known as the Rio Summit, Rio Conference, and Earth Summit, was a major United Nations conference held in Rio de Janeiro from 3 June to 14 June 1992. In 2012, the United Nations Conference on Sustainable Development also took place in Rio, and is also commonly called Rio+20 or Rio Earth Summit 2012 , and was held in June 20-22.
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reached on the best way of organizing all the definitions of these measures but, with the “Istanbul Declaration” signed in June 2007, at the end of the II OECD World Forum on “Statistics, Knowledge and Policy”, by the European Commission, the OECD, the Organisation of the Islamic Conference, the United Nations, the United Nations development Programme and the World Bank, one can say that the need to go “beyond GDP” is now fully recognised at a political level.
ISTANBUL DECLARATION We, the representatives of the European Commission, the Organisation for Economic Cooperation and Development, the Organisation of the Islamic Conference, the United Nations, the United Nations Development Programme and the World Bank, recognise that while our societies have become more complex, they are more closely linked than ever. Yet they retain differences in history, culture, and in economic and social development. We are encouraged that initiatives to measure societal progress through statistical indicators have been launched in several countries and on all continents. Although these initiatives are based on different methodologies, cultural and intellectual paradigms, and degrees of involvement of key stakeholders, they reveal an emerging consensus on the need to undertake the measurement of societal progress in every country, going beyond conventional economic measures such as GDP per capita. Indeed, the United Nation’s system of indicators to measure progress towards the Millennium Development Goals (MDGs) is a step in that direction. A culture of evidence-based decision making has to be promoted at all levels, to increase the welfare of societies. And in the “information age,” welfare depends in part on transparent and accountable public policy making. The availability of statistical indicators of economic, social, and environmental outcomes and their dissemination to citizens can contribute to promoting good governance and the improvement of democratic processes. It can strengthen citizens’ capacity to influence the goals of the societies they live in through debate and consensus building, and increase the accountability of public policies. We affirm our commitment to measuring and fostering the progress of societies in all their dimensions and to supporting initiatives at the country level. We urge statistical offices, public and private organisations, and academic experts to work alongside representatives of their communities to produce high-quality, facts- based information that can be used by all of society to form a shared view of societal well-being and its evolution over time. Official statistics are a key “public good” that foster the progress of societies. The development of indicators of societal progress offers an opportunity to reinforce the role of national statistical authorities as key providers of relevant, reliable, timely and comparable data and the indicators required for national and
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international reporting. We encourage governments to invest resources to develop reliable data and indicators according to the “Fundamental Principles of Official Statistics” adopted by the United Nations in 1994. To take this work forward we need to: • encourage communities to consider for themselves what “progress” means in the 21st century; • share best practices on the measurement of societal progress and increase the awareness of the need to do so using sound and reliable methodologies; • stimulate international debate, based on solid statistical data and indicators, on both global issues of societal progress and comparisons of such progress; • produce a broader, shared, public understanding of changing conditions, while highlighting areas of significant change or inadequate knowledge; • advocate appropriate investment in building statistical capacity, especially in developing countries, to improve the availability of data and indicators needed to guide development programs and report on progress toward international goals, such as the Millennium Development Goals. Much work remains to be done, and the commitment of all partners is essential if we are to meet the demand that is emerging from our societies. We recognise that efforts will be commensurate with the capacity of countries at different levels of development. We invite both public and private organisations to contribute to this ambitious effort to foster the world’s progress and we welcome initiatives at the local, regional, national and international levels. We would like to thank the Government of Turkey for hosting this second OECD World Forum on “Statistics, Knowledge and Policy.” We also wish to thank all those from around the world who have contributed to, or attended, this World Forum, or followed the discussions over the Internet. Istanbul, 30 June 2007
As part of these worldwide initiatives, following the Stiglitz-Sen-Fitoussi recommendations, several European projects have been launched, both at national or regional level, and at supranational level. The main contribution of these projects is to involve in the debate on “Beyond GDP” a huge number of European institutions (such as Eurostat, the EU Commission), National Statistical Institutes, Universities, Research Centers as well as local administrations. The European Union has promoted several initiatives in order to encourage the on-going discussions on the measurement of well-being and the progress of societies among all relevant stakeholders, develop a European network and support National Statistical Institutes' measurement initiatives in this area.
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The following chart shows some of the recent European initiatives.
E-FRAME: European Network on Measuring Progress http://www.eframeproject.eu/
Beyond GDP initiative http://www.beyond-gdp.eu/
Measurement of and target-setting for well-being: an initiative by the WHO Regional Office for Europe. http://www.euro.who.int
BRAINPOoL: Bring alternative indicators in to policy http://www.brainpoolproject.eu/
GDP and beyond (Eurostat) http://epp.eurostat.ec.europa.eu/
Measuring Well-Being and Progress (OECD) www.oecd.org/measuringprogress
Wikiprogress http://www.wikiprogress.org/index.php/Main_Page Some European Initiatives European Some
Commission on the Measurement of Economic Performance and Social Progress http://www.stiglitz-sen-fitoussi.fr/en/index.htm
In stream Project http://www.in-stream.eu/
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2.6. THE EVOLUTION OF MEASURES RELATED TO GDP
We conclude this chapter by showing a chronological evolution of the measures of progress proposed after GDP. As shown in figure 9, it is possible to split the lapse of time from the 1930s to the 20120s in three different blocks: Material, Social and Global stage. During the Material stage attention has been paid only to the economic indicators, such as GDP or GNP. During the years from the 1950s to the end of 1980s several indices have been proposed with the aim of including also the social dimension of progress beside the economic one (Social stage). Among others, the Gross National Happiness, developed in 1972 in Bhutan and the Measure of Economic Welfare developed by Nordhaus and Tobin in 1972, belong to this phase. Since the 1990s, the measures introduced to monitor progress have added to the previous dimensions also an attention to environment (Global stage). The Measure of Australia’s Progress developed by the Australian Bureau of Statistics and the Better Life Index proposed by OECD, belong to this recent phase.
Figure 9: Chronological evolution of measures of progress related to GDP
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Next chapter will be devoted to an in-depth description and definition of some indices going beyond GDP.
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Measure what is measurable,
and make measurable what is not so.
Galileo Galilei (1564-1642)
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3. BESIDES AND BEYOND GDP
This chapter introduces what are, in our opinion, the most relevant attempts of producing measures that go besides and beyond GDP indicators and proposes a taxonomy to categorize these indicators.
We first present a brief description of these measures, by trying to answer the following questions:
• How is it possible to define an indicator?
• What kind of variables are involved in its calculation?
• Where is it possible to find additional information?
We then propose a first categorization of the mentioned indicators in economic (that is, based on GDP), social, and environmental indicators. We find that it is impossible to categorize these indicators without any ambiguity since an environmental indicator could also take into account aspects related to the social sphere. (Section 1)
Then we classify the introduced indicators into Economic, Social, Environmental and Well- being, following the classification proposed by Stiglitz-Sen-Fitoussi report (Section 2).
In Section 3, we introduce a taxonomy related to several characteristics of an indicator such as:
• the type or final value that it assumes (i.e. are all the dimensions aggregated in a single number? Is it compound? Is it dashboard?)
• the approach used to calculate it (subjective or objective)
• the link with GDP (is it an indicator that adjusts GDP? Does it replace GDP? Is it an indicator aimed at supplementing GDP?)
• The geographical implementation of the project (is it calculated at local or regional level? Is it calculated at international level?)
A geographical representation of the index compared to its attributes concludes this chapter.
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3.1. A BRIEF DESCRIPTION OF INDICATORS BEYOND GDP
Since the Stiglitz-Sen-Fitoussi Report, experts such as economists, statisticians, as well as politicians and common people, have been working towards constructing and defining new multidimensional indicators and criticizing the existing ones. However, as stressed in previous chapters, well-being and progress indicators have a long tradition that precede the Stiglitz-Sen- Fitoussi Report.
In the following table, we have collected and summarized the most important indicators proposed in literature which, in our opinion, must be considered as milestones when studying this phenomenon. The inventory presents indices simply in the alphabetic order. The information included in the following table is based on reports, academic papers, books as well as websites. For each index we present a brief definition and information on the variables involved as well as the methodology. In particular, we focus on: the aim of the indicator, the year in which it was formulated, the name of person who developed it and the name of the project (if any) under which the indicator was developed. Also mentioned are: its periodicity, the geographic coverage and where it is possible to find additional information about it.
INDEX BRIEF DESCRIPTION
The Adjusted Net Saving (ANS) is a sustainability indicator proposed by the World Bank and is defined as a percentage of Gross National Income (GNI9). It derives from the standard national accounting measure of gross savings by making four adjustments: 1) consumption of fixed capital is deducted to obtain net national savings; 2) current public expenditure on education is added to account for investment in human capital; 3) depletion estimates of a variety of natural resources are deducted to reflect the decline in asset values associated with extraction and depletion; and Adjusted Net 4) deductions are made for damage from carbon dioxide and particulate emissions. Saving The first step in the calculation of ANS derives from the Net national saving: (or Genuine Saving) Gross national saving - Consumption of fixed capital = Net national saving The indicator is then adjusted for additional variables:
+ Net national saving + Education expenditure - Energy depletion - Mineral depletion - Net forest depletion - Damage from carbon dioxide emissions
9 Gross national income (GNI) is the sum of value added by all resident producers plus any taxes (less subsidies) not included in the evaluation of output, plus net receipts of primary income (compensation of employees and property income) from abroad.
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- Damage from particulate emissions = Adjusted Net Saving
By definition, all the terms are expressed as percentage of GNI. This indicator gives a measure of a country’s sustainability since it measures the change in total wealth (both natural resources and human capital) during a given accounting period. In particular, it evaluates if, in a given period, the same quantities of natural resources and human capital, are preserved for future generations. Data are published by World Bank in World Development Indicators.
http://www.worldbank.org/environmentaleconomics
The Better Life Index is an interactive composite index of well-being proposed by the Organisation for Economic Cooperation and Development (OECD). One of its main features is the involvement of citizens in the debate on its construction. The advantage of a composite index is that it can provide an easy-to-read overview of well-being patterns.
This index allows comparing well-being across countries, and is based on 11 topics defined as essential by the OECD. 1. Housing a. Rooms per person b. Housing expenditure c. Dwelling with basic facilities 2. Income a. Household disposable income b. Household financial wealth
3. Jobs a. Employment rate b. Long-term unemployment rate c. Personal earnings Better Life Index d. Job security 4. Community a. Quality of support network 5. Education a. Educational attainment b. Years in education c. Students skills in maths, reading and science 6. Environment a. Air pollution b. Water quality 7. Civic engagement a. Voter turnout b. Consultation on rule-making 8. Health a. Life expectancy b. Self-reported health 9. Life Satisfaction a. Life Satisfaction 10. Safety a. Homicide rate b. Assault rate 11. Work-life balance
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a. Employees working very long hours b. Time devoted to leisure and personal care
These 11 dimensions reflect what the OECD has identified as essential to well-being in terms of MATERIAL LIVING CONDITIONS (housing, income, jobs) and QUALITY OF LIFE (community, education, environment, governance, health, life satisfaction, safety and work-life balance). Each of the 11 topics of the index is currently based on one to three indicators. Within each topic, the indicators are averaged with equal weights.
Data cover the 34 countries that are members of the OECD and mostly mainly come from official sources such as the OECD or National Accounts, United Nations Statistics, National Statistics Offices.
So far, data on most of the dimensions of the Better Life Index (BLI) are not available at a disaggregated level; in other words, they do not allow comparisons between various social groups (e.g. men vs. women, youth vs. elderly, etc.) Also, the index cannot be compared over time, as its methodology is still being fine-tuned (for instance there are five new indicators this year). In addition, many of the BLI dimensions do not change quickly over time, and therefore some years will have to pass before assessment of genuine progress/regression is possible.
An updated version of the index, launched on 22 May 2012, also includes data on gender and inequality.
http://www.oecdbetterlifeindex.org/
The term “buen vivir” originates from a Quechua phrase Sumak Kawsay. Translated into English this phrase would be “living in plenitude” but usually it is referred to as “Good Living Index” or by its Spanish equivalent (Buen Vivir). The index was proposed by the Ecuadorian National Statistics Office (INEC ) and by the Department for Planning in Ecuador and subsequently adopted by Bolivia and Brazil. In addition it is considered as one of the most important alternatives to GDP indicator. It is strictly related to the concept of well-being although it involves additional aspects not computed in the traditional well-being index. In fact, it puts emphasis on living in harmony with others and with the environment. Buen Vivir is a multi-dimensional indicator that encompasses satisfaction of Buen Vivir needs, quality of life, loving and being loved, and healthy living in peace and harmony with nature. (Good Living) The peculiarity of this indicator is the final value that the index adopts since it gives, as a result, the number of years of life (time) lost because of degradation of the natural environment. The final structure of this measure is a dashboard of indicators.
In Ecuador, there are also attempts at extending this index to incorporate subjective well-being data.
http://plan.senplades.gob.ec/
The Canadian Index of Wellbeing (CIW) is an initiative that reports on the quality of life of Canadians. Since the 1960’s in Canada there has been increasing interest and effort in measuring social progress. In 1999 the Atkinson Charitable Foundation (ACF) recognized the need to create an independent and credible national voice to measure the economic, health, social and environmental wellbeing of Canadians, and developed the Canadian Index of Wellbeing (CIW). This index is a new way of measuring well-being that goes beyond narrow economic measures like GDP. Canadian Index of The CIW measures well-being in Canada across 8 interconnected domains of wellbeing: Wellbeing 1) Community vitality: measures strength, activity and inclusiveness of relationships between residents, private sector, public sector and civil society organizations that foster individual and collective wellbeing. 2) Democratic engagement: measures the participation of citizens in public life and in governance, the functioning of Canadian government and the role Canadians and their institutions play as global citizens.
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3) Education: measures literacy and skill levels of the population, including the ability of both children and adults to function in various contexts and the ability to plan for and adapt to future situations. 4) Environment (= Ecosystem wealth): measures the state of, and trends in, Canada’s environment by looking at the stocks and flows of Canada’s environmental goods and services. 5) Healthy Populations: measures the physical, mental, and social wellbeing of the population by looking at different aspects of health status and certain determinants of health. 6) Leisure and culture: measures activity in the widespread field of culture, which involves all forms of human expression; the more focused area of the arts; and recreational activities. 7) Living standard: measures the level and distribution of income and wealth, including trends in poverty; income volatility; and economic security, including job security, food, housing and the social safety net. 8) Time use: it measures the use of time; how people experience time, and how it affects wellbeing.
It is calculated annually and since 2012 also at provincial level.
https://uwaterloo.ca/canadian-index-wellbeing/
The Capability Index (CI) was formulated in 2007 by Ingrid Robeyns and Robert van der Veen as a measure of quality of life.
They propose the following list of items that should be included in a policy-relevant index of quality of life:
1) physical health 2) mental health 3) knowledge and intellectual development 4) labour Capability Index 5) care 6) social relations 7) recreation 8) shelter 9) living-environment 10) mobility 11) security 12) non-discrimination and respect for diversity 13) political participation
http://www.mnp.nl/en/publications/2007/Sustainablequalityoflife.html
The name Carbon Footprint index originates from ecological footprint and denotes "the total sets of greenhouse gas (GHG) emissions caused by an organization, event, product or person." In 2011, Wright, Kemp, and Williams, defined the Carbon Footprint as "a measure of the total amount
Carbon Footprint of carbon dioxide (CO2) and methane (CH4) emissions of a defined population, system or activity, considering all relevant sources, sinks and storage within the spatial and temporal boundary of the
population, system or activity of interest. Calculated as carbon dioxide equivalent (CO2e) using the relevant 100-year global warming potential (GWP100)”.10
1010 Wright, L.; Kemp, S., Williams, I. (2011). 'Carbon footprinting': towards a universally accepted definition. Carbon Management 2 (1): 61–72.
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Several attempts have been made to calculate the Carbon Footprint (a list of values of CO2 pounds released while making products is available at the following webpage: http://www.co2list.org/files/carbon.htm). The most important is by the “Bekeley's CoolClimate Network research consortium” (University of California) which annually provides a peer-reviewed calculation. The mitigation of carbon footprints through the development of alternative projects, such as solar or wind energy or reforestation, represents one way of reducing a carbon footprint and is often known as Carbon offsetting. The main influences on carbon footprints include population, economic output, and energy and carbon intensity of the economy. These factors are the main targets of individuals and businesses in order to decrease carbon footprints.
http://www.footprintnetwork.org/pt/index.php/GFN/page/carbon_footprint/
The unit for Economic Analysis at the Department of Economic Statistics of Statistics Sweden has developed it in 2004. It is a composite indicator, taking in account several dimensions of well-being, Comparing such as Economic standard, Leisure time, Health, Environment and Welfare. As suggested by the Welfare of authors, this is a first attempt to “Comparing apples and oranges”. Nations http://www.scb.se/statistik/OV/OV9999/2004A01/OV9999_2004A01_BR_X100ST0415.pdf
This indicator belongs to the so-called composite index. Its aim is to assess and compare perceived levels of corruption among public officials and politicians in many countries around the world. Transparency International computes it as a survey of surveys, from 1970 annually.
Corruption For each country, a minimum of three surveys have been conducted and the interviewees are both Perceptions Index residents and non-residents of the countries considered. The CPI provides a rank of countries according to their level of perceived corruption. The score ranges from 0 (indicating high levels of perceived corruption) to 10 (low levels).
http://transparency. org/policy_research/surveys_indices/cpi/2007/ methodology
The Ecological Footprint is a standardized measure of demand for natural capital that can be contrasted with the planet's ecological capacity to regenerate
The first academic publication about the ecological footprint was by William Rees in 1992. The ecological footprint concept and calculation method was developed as a PhD dissertation by Mathis Wackernagel, under Rees' supervision at the University of British Columbia in Vancouver, Canada, from 1990–1994. Ecological From 2003, this indicator has been calculated annually by Global Footprint Network. The average Footprint per country ranges from over 10 to under 1 global hectare per person.
In the last ten years there has been increasing interest in calculating these indicators and, as a consequence, different methodologies have been found to do this. In addition, a number of government organizations have active Ecological Footprint initiatives and there are several attempts to calculate this indicator at urban level.
http://www.footprintnetwork.org/en/index.php/GFN/
The European Environmental Agency (EEA) annually launches several Environmental indicators and EEA Core Set of fact sheets about Europe's environment, such as transport emissions of air pollutants; Total Indicators primary energy intensity; Energy efficiency and specific CO2 emissions, Distribution of marine species, among others. All these indicators belong to five macro areas: Air pollution, biodiversity,
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climate change, land use and water.
ww.eea.europa.eu/data-and-maps/indicators/#c5=&c7=all&c0=10&b_start=0
Sustainable Development Indicators (SDIs) are used in the European Union to monitor the EU Sustainable Development Strategy (EU SDS). Every two years the results are published in a report EU set of by Eurostat. All the indicators (more than 100) are grouped in ten themes: 1) Socio-economic Sustainable development, 2) Sustainable consumption and production, 3) Social inclusion, 4) Demographic Development changes, 5) Public health, 6) Climate change and energy, 7) Sustainable transport, 8) Natural Indicators resources, 9) Global partnership and 10) Good governance. http://epp.eurostat.ec.europa.eu/portal/page/portal/sdi/context
The Gender Empowerment Measure (GEM) is the United Nations Development Programme's attempt to measure the extent of gender inequality worldwide, based on estimates of women's Gender relative economic income, participations in high-paying positions with economic power, and access Empowerment to professional and parliamentary positions. Measure (GEM) http://hdr.undp.org/en/statistics/indices/gdi_gem/
The Gender-related Development Index (GDI) measures achievement in the same basic capabilities as the HDI does, but also takes note of inequality in achievement between women and men. The greater the gender disparity in basic capabilities, the lower a country´s GDI compared with its HDI. The GDI is simply the HDI discounted, or adjusted downwards, for gender inequality. It ranges from 0, which indicates that women and men fare equally, to 1, which indicates that women fare as poorly as possible in all measured dimensions. Two indicators measure the health Gender-related dimension: maternal mortality ratio and adolescent fertility rate. Two indicators also measure the Development empowerment dimension: the share of parliamentary seats held by each sex and by secondary and Index (GDI) higher education attainment levels. Labour dimension is measured by women’s participation in the work force. In a ranking of 140 countries (HDI 166) as well as in the HDI list, Norway tops the GDI list and Niger is at the bottom. http://hdr.undp.org/en/statistics/gii/
The Genuine Progress Indicator (GPI) derives from the Index of Sustainable Economic Welfare. It was developed by the non-profit organization Redefining Progress (based in Oakland, California) in 1995 and it is essentially a second-generation version of the ISEW.
GPI= + Personal consumption weighted by income distribution index + Value of household work and parenting + Value of higher education + Value of volunteer work + Services of consumer durables + Services of highways and streets Genuine Progress - Cost of crime Indicator - Loss of leisure time - Cost of unemployment - Cost of consumer durables - Cost of commuting - Cost of household pollution abatement - Cost of automobile accidents - Cost of water pollution - Cost of air pollution - Cost of noise pollution - Loss of wetlands - Loss of farmland -/+ Loss of forest area and damage from logging roads
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- Depletion of non-renewable energy resources - Carbon dioxide emissions damage - Cost of ozone depletion +/- Net capital investment +/- Net foreign borrowing
The purpose of both indicators is the same: to portray economic progress (or lack thereof) more accurately by accounting for those factors that affect quality of life and our ability to sustain it into the future.
http://rprogress.org/index.htm
The Genuine Savings Indicator (GSI) was developed by World Bank research to assess an economy’s sustainability such as a Green Adjustment to GDP’. The Genuine Saving Indicator (GSI) measures the value of the net change in a whole range of assets that are important for development: produced assets, natural resources, environmental quality, human resources and foreign assets, thus showing whether the economy is sustainable or not. Its aim is to indicate the rate at which national wealth (broadened to include natural capital and human capital) is being created or destroyed. This indicator of progress or setback to genuine Genuine Saving savings also tries to provide a combined measure of a country’s sustainable development by adding Indicator or subtracting several non-economic, mainly environmental, resources from a basis formed by national savings. The formula for genuine savings is given in World Development Indicators, World Bank, 1998, as the following equation: Genuine savings = GDP – public and private consumption – Net foreign borrowing – depreciation of produced assets + current spending on education – resource depletion – pollution damage. www.worldbank.org/
Gross National Happiness is a term coined by His Majesty the Fourth King of Bhutan, Jigme Singye Wangchuck in the 1970s. Its four pillars have often explained the concept of GNH: good governance, sustainable socio-economic development, cultural preservation, and environmental conservation. Lately the four pillars have been further expanded into nine domains
The Gross National Happiness Index (GNH) is a single number index developed from 33 indicators categorized under nine domains:
1. psychological wellbeing, 2. health, 3. education, Gross National 4. time use, Happiness Index 5. cultural diversity and resilience, (Buthan) 6. good governance, 7. community vitality, 8. ecological diversity and resilience, 9. living standards.
Each domain represents one of the components of wellbeing of the Bhutanese people, and here the term ‘wellbeing’ refers to fulfilling conditions of a ‘good life’ as per the values and principles laid down by the concept of Gross National Happiness. The GNH Index is based upon a robust multidimensional methodology known as the Alkire-Foster method. In addition, the GNH Index is decomposable by any demographic characteristic and so is designed to create policy incentives for the government, NGOs and businesses of Bhutan to increase GNH. The domains are equally weighted and within each domain, the objective indicators are given higher weights while the subjective and self-reported indicators are assigned lower ones. Critics state that because GNH depends on a series of subjective judgments about well-being, governments would be able to
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define GNH in a way that suits their interests and that international comparison of well-being would be difficult using this model.
http://www.grossnationalhappiness.com/
Happiness is defined as the degree to which a person enjoys his or her life-as-a-whole. Accordingly 'Gross National Happiness' is defined as the degree to which citizens in a country enjoy the life they live. Individual happiness can be measured by self-report on a single standard question. Hence Gross National Happiness can be measured by the average response to these questions in general populations surveys. Survey data on average self-report of happiness can be combined with Happy Life Years estimates of life expectancy based on civil registration. The resulting index indicates the length and happiness of people’s lives in a country and can be expressed in a number of Happy-Life-Years (HLY).
http://worlddatabaseofhappiness.eur.nl/
The Happy Planet Index (HPI) was introduced by the New Economics Foundation (NEF) in July 2006. It is an index of human well-being and environmental impact that incorporates three separate indicators: ecological footprint, life satisfaction and life expectancy as follows:
HPI=( Life satisfaction x Life expectancy)/Ecological Footprint
The final value belongs to the interval 0 – 100. The 2012 HPI report ranks 151 countries and is the Happy Planet third time the index has been published. Index Much criticism of the index has been due to commentators falsely understanding it to be a measure of happiness, when it is in fact a measure of the ecological efficiency of supporting well- being.
http://www.happyplanetindex.org/
http://www.neweconomics.org/publications/happy-planet-index
The Human Development Index (HDI) is a composite (synthetic) statistic indicator that ranks a country’s achievements according to different areas of human development: a long and healthy life (using life expectancy at birth), knowledge (adult literacy combined with gross enrolment in primary, secondary and tertiary education) and a decent standard of living (using GDO per capita in purchasing power parity US dollars).
The inventor of this index is the economist Mahbub ul Haq and it was integrated by the economist Amartya Sen in 1990. The final publication was under the supervision of the United Nations Human Development Programme. Development Since 1990, it is published annually. Twenty years after the first calculation, an alternative Index formulation was proposed (“Human Development Report”, 2010). The major novelties are the way of aggregation (instead of calculating the algebraic mean, the geometric one was introduced) and normalization over three dimensions :
The final expression is the following:
= 3 where 퐻퐷퐼 √퐿퐸퐼 ∙ 퐸퐼 ∙ 퐼퐼
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• LEI is the Life Expectancy Index (LEI) computed as: = , with LE being Life 퐿퐸−퐿퐸푀 Expenctancy; for a given counties and and respectively퐿퐸퐼 퐿퐸푀−퐿 the퐸푚 Max Value and the Min. value of LE. Usually, = 82,3 and = 20. 퐿퐸푀 퐿퐸푚 • EI is the Education Index (EI)퐿퐸푀 computed as: 퐿퐸푚
, , = 푀푌푆 퐸푌푆 �130.9522 ∙ 20 6 where MYS is the Mean Years of Schooling퐸퐼 and EYS is the Expected Years of Schooling
( ) • II, Income Index is defined as = ( ) , where GNI is the Gross National ( , ) ( ) ln 퐺푁퐼푝푐 −ln 100 Income pc 퐼퐼 ln 107 721 −ln 100 http://hdr.undp.org/en/humandev/
The Human Poverty Index (HPI) was developed by the United Nations (UN) as a composite indicator measuring deprivations of a country in the basic dimensions included in the human development index. It was constructed as a complement to the Human Development Report (and since 1997 included in it) in order to better reflect the extent of deprivation in developed countries. In 2010 it was supplanted by the UN's Multidimensional Poverty Index. The HPI is derived separately for developing countries (HPI-1) and for a group of selected high-income OECD countries (HPI-2)
For developing countries, the three dimensions are the following: a) a long and healthy life, b) knowledge, and c) a decent standard of living. The formula for calculating it is:
1 1 = ( + + ) 1 3 훼 훼 훼 훼 퐻푃퐼 − � 푃1 푃2 푃3 �
where, P1 is the Probability at birth of not surviving to age 40 (times 100), P2 the adult illiteracy
rate and P3 represents the unweighted average of population without sustainable access to an Human Poverty improved water source and children under weight for age. Index (HPI)
For selected high-income OECD countries (HPI-2), HPI takes into account four dimensions: a long and healthy life, knowledge, a decent standard of living and social exclusion. The formula for calculating it is:
1 2 = ( + + + ) 1 4 훼 훼 훼 훼 훼 퐻푃퐼 − � 푃1 푃2 푃3 푃4 �
Where P1 represents the probability at birth of not surviving to age 60 (times 100), P2 adults
lacking functional literacy skills, P3 is the population below income poverty line (50% of median
adjusted household disposable income) and P4 is the rate of long-term unemployment (lasting 12 months or more).
http://hdr.undp.org/en/statistics/data/hd_map/hpi/
The Index of Economic Well-being (IEWB) was developed in 1998 by a no-profit Canadian Index of organisation, called “Centre for the Study of Living Standards” following the original idea of Lars Economic Well- Osberg (a member of the MacDonald Commission entitled “The Measurement of Economic being Welfare”). The index aims at ” at measuring the economic component of social well-being in a more realistic and comprehensive way than traditional indices, such as the GDP” (see. IEWB web-
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page).
The goal of the IEWB is not to summarize the economic well-being of society in a single objective figure, but to provide a well-organized and manageable set of objective data
The index consists of a weighted average of four combined indicators on consumption flows, wealth (economic, human and environmental), inequalities and economic security (within a present and future perspective). Each component (with a 25% weight) articulates data regarding national accounts and social statistics. They are as follows:
1. Effective per capita consumption flows, including consumption of marketed goods and services; government services; effective per capita flows of household production; leisure; and changes in life span. 2. Net societal accumulation of stocks of productive resources, including net accumulation of tangible capital; housing stocks; net changes in the value of natural resources stocks; environmental costs; net changes in the level of foreign indebtedness; accumulation of human capital; and the stock of R&D investment. 3. Income distribution, including the intensity of poverty (incidence and depth) and the inequality of income. 4. Economic security from job loss and unemployment, illness, family breakup, and poverty in old age.
The overall IEWB is calculated as the weighted average of the four scaled components, with aggregation weight determined subjectively according to individual views on relative importance of each.
The index was calculated for Canada, United States and some OECD member countries.
www.csls.ca/iwb.asp
The Index of Individual Living Conditions is an integrated part of the European System of Social Indicators. Within this system, it is considered as a summary measure of objective living conditions Index of of life as a total. The indicators system provides time series data for more than 30 nations: the EU Individuals Living member states, Switzerland, Norway, as well as Japan and the United States as the two major Conditions reference societies. http://www.gesis.org/unser-angebot/daten-analysieren/soziale-indikatoren//data/eusi/index.htm
The Index of Sustainable Economic Welfare (ISEW) proposed by Herman Daly and John B. Cobb in 1989 provides a more down-to-earth representation of the well-being of a society than GDP does, since its definition also involves variables that are not included in conventional national accounts (such as social and environmental issues). The ISEW is a measure of economic welfare in that it measures the contribution of a country’s or region’s economy to the overall level of well-being of its citizens. Index of The ISEW is roughly defined by the following formula. Sustainable ISEW = personal consumption Economic + public non-defensive expenditures Welfare - private defensive expenditures + capital formation + services from domestic labour - costs of environmental degradation - depreciation of natural capital
Several attempts have been made to measure ISEW at national level (Australia, Austria, Belgium, Chile and the State of Maryland among others). Nevertheless, performing cross-country
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comparisons is very arduous due to problems in the availability and comparability of data.
It is similar to the Genuine Progress Indicator (GPI).
http://www.wikiprogress.org/index.php/Index_of_Sustainable_Economic_Welfare_(ISEW)
The Living Planet Index is an indicator of the state of global biological diversity. It gives information on trends in the abundance of the world’s vertebrates and offers insights into which habitats or ecosystems have species that are declining most rapidly. Consequently, this information can be used to define the impact humans are having on the planet and for guiding actions to address biodiversity loss. The World Wide Fund originally developed it for Nature (WWF) in collaboration with the biodiversity assessment and policy implementation arm of the United Nations Environment Programme. Living Plant Index Results are presented every two years since 1970 in the WWF Living Planet Report. More recently National and Regional reports are being produced focusing on relevant issues at a smaller scale The data set contains over 10,000 population trends for more than 2,500 species of fish, amphibians, reptiles, birds and mammals and is calculated using over 7000 of these population time-series. Each species trend is aggregated to produce an index for the terrestrial, marine and freshwater systems. The three system indices are weighted equally within tropical and temperate regions, which are then aggregated to produce the global LPI. http://wwf.panda.org/about_our_earth/all_publications/living_planet_report/
The Measure of Domestic Product (MDP) is a new measure of the state of Britain's economy. It shows that social progress in Britain has become increasingly decoupled from economic growth over the last 50 years and has stalled completely in the last three decades. It was introduced by the New Economic Foundation (NEF) and is closely modelled on earlier work of UK ISEW though several additional developments have been incorporated into this new measure. The items of the UK MDP are categorized in four dimensions:
• Economic indicators: o Consumer expenditure + o Value of services from domestic labour + o Public (non-defensive) expenditures on health and education + o Difference between expenditures on and service flow from consumer durables o Net capital growth mainly + Measure of o Net international position mainly – Domestic Product • Social costs o Effects of inequality in the distribution of incomes – o Defensive private expenditures on health and education – o Costs of commuting – o Costs of car accidents – o Costs of noise nuisance – o Costs of crime – o Costs of family breakdown – • Environmental costs o Costs of personal pollution control – o Costs of air pollution – o Costs of water pollution – o Estimated costs of climate change – o Costs of ozone depletion – • Prudent use of natural resources o Loss of natural habitats – o Loss of farmlands –
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o Depletion of finite natural resources –
http://www.neweconomics.org/publications/chasing-progress
On April 2002, the Australian Bureau of Statistics (ABS) made a major contribution to measuring whether life is improving in Australia with the release of the first issue of Measures of Australia's Progress (MAP). These measures are designed to help Australians address the question, “Is life in Australia getting better?” The main idea is that Australians can use this evidence to form their own view of how their country is progressing.
Progress dimensions are grouped under three broad headings: society, economy and environment.
1. Society: a. Health b. Education and training c. Work d. Crime e. Family, community and social cohesion f. Democracy, governance and citizenship 2. Economy a. National income b. National wealth c. Household economic wellbeing d. Housing e. Productivity 3. Environment a. Biodiversity Measures of b. Land Australia’s c. Inland waters progress (MAP) d. Oceans and estuaries e. Atmosphere f. Waste
Moreover there are also some supplementary dimensions: 4. Supplementary dimensions a. Supplementary dimension b. Culture and leisure c. Communication d. Transport e. Inflation f. Competitiveness and openness A headline indicator, which directly addresses the notion of progress, is proposed in most of these dimensions. Furthermore, some dimensions also include information regarding specific groups of interest, such as men and women. The calculation is provided annually and publication is now entirely electronic. MAP does not include indicators for every aspect of progress, which could be significant to Australia. This is partly because some areas of progress are inherently subjective and hence difficult to measure reliably. At the beginning of the 2013, the ABS launched a new initiative, called “You spoke, we listened” (http://betaworks.abs.gov.au/betaworks/betaworks.nsf/dx/measures-of-australia-progress-2013- revision.htm) aimed at involving Australian people in the construction of an indicator that better reflect their idea about the progress. After this on-line consultation (http://theblogprogress.blogspot.com.es/2013/01/you-spoke-we-listened-measures-of.html), the ABS is planning on giving a new version of MAP in late 2013. http://www.abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/1370.0~2010~Main%20Features ~Home%20page%20(1)
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INDEX BRIEF DESCRIPTION
The CNEL (Consiglio nazionale dell'economia e del lavoro – Italian National Council of economy and work) and ISTAT (Isitituto Nazionale di Statistica – Italian National Institute of Statistics) launched, in 2011, an 18-month initiative for the measurement of "equitable and sustainable well-being" aimed at producing a set of indicators able to provide a shared vision of progress for Italy. This information will be legitimated by a council of experts, relevant stakeholders and citizens in dedicated meetings and workgroups, online consultation and the inclusion of a question set to identify people’s priorities when dealing with individual and national well-being. Results highlight that the factors considered to be the most important are health, environment, education and training, and quality of public services
The Key domains for the Italian BES are conceptual and divided in: Individual sphere and Context.
The domains belonging to the first group are:
1. Environment Measuring 2. Health equitable and 3. Economic well-being sustainable wellbeing in Italy 4. Education and training (BES –Benessere 5. Work and life balance Equo e 6. Social relationship Sostenibile) 7. Security 8. Subjective well-being
Whereas the domains of the latter group are: 9. Landscape and cultural heritage 10. Research and innovation 11. Quality of services 12. Policy and institutions
The total number of indicators divided in the domains is 134.
There are also several initiatives, under ISTAT supervision, planned to calculate BES at local level (provinces).
http://www.misuredelbenessere.it/
Measuring Ireland’s Progress is a statistical report that provides an overall view of the economic, social and environmental situation in Ireland. The Central Statistics Office publishes it every year. The aim of this report is to analyse Ireland’s progress and it also benchmarks the situation in Ireland against the other 26 EU member states and six additional countries (Iceland, Norway, Switzerland, Croatia, Turkey and Macedonia).
It consists of 10 dimensions (domains): 1. Economy Measuring 2. Prices Ireland’s Progress 3. Employment and unemployment 4. Social cohesion: 5. Education 6. Health 7. Population 8. Housing: 9. Crime 10. Environment and 49 sub-domains for a totality of 109 indicators. A number of other EU countries have published similar reports (e.g. Spain and Germany)
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http://www.cso.ie/en/releasesandpublications/measuringirelandsprogress/
On November 2010, the U.K. Office for National Statistics launched an initiative called “Measuring national well-being”. This project was proposed to develop a measure of national well-being. A first summary of findings was released in February 2011 and a revised set of measures was published in July 2012. In the same month, the first annual experimental subjective well-being analysis was published (http://www.ons.gov.uk/ons/dcp171766_272294.pdf). The aim of the programme is to develop and publish an accepted and trusted set of National Statistics that helps people to understand and monitor national well-being. It consists of several domains: • Individual well-being (life satisfaction); • Our relationships, measured taking in account Satisfaction with your spouse/partner, Satisfaction with your social life, % of people who trust other people in your Measuring neighborhood, % of people who feel that they belong strongly to the neighborhood National Well- • Health, considering Healthy life expectancy, People not reporting limiting long term Being illness or disability, Satisfaction with your health , GHQ12 assessment of mental well- being, How satisfied are you with your mental wellbeing? • What we do; • Where we live; • Personal finance; • Education and skills; • The economy; • Governance; • The natural environment;
http://www.ons.gov.uk/ons/guide-method/user-guidance/well-being/index.html
An aggregate measure of development based on the 60+ official United Nations Millennium Millennium Development Goals indicators. These indicators can be visualized as color-coded maps or index Development trees or as rankings showing the distribution of scores for the whole world or for selected country Goals Index groups. The Index is structured as a dashboard and in September 2013 it has been updated. http://esl.jrc.ec.europa.eu/
The New Economics Foundation (NEF) launched the National Accounts of Well-being (NAWB) in January 2009. The aim was to explicitly capture how people feel and experience their lives. It is considered as the first comprehensive international analysis of well-being, which provides an alternative measure of national progress to GDP.
Personal well-being is made up of five main components, some of which are broken down further into sub-components. These are: 1. Emotional well-being National a. Positive feelings, Accounts of Well- b. Absence of negative feelings Being 2. Satisfying life 3. Vitality 4. Resilience and self-esteem a. Self-esteem, b. Optimism c. Resilience 5. Positive functioning. a. Autonomy, b. Competence, c. Engagement,
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d. Meaning and purpose 6. Social well-being: a. Supportive relationships; b. Trust and belonging.
National Accounts of Well-being uses comprehensive data from a survey of 22 European nations examining both personal and social well-being.
http://www.nationalaccountsofwellbeing.org/
QUARS is the Acronym of Quality of development at the Regional level (Indice di Qualità dello Sviluppo Regionale). It is an indicator that tries to identify and connect with the other components of development based on sustainability, quality, equity, solidarity and peace.
The over 40 indicators are divided into 7 categories:
1. Environment, 2. Economy and Work, 3. Rights and Citizenship, QUARS 4. Health, 5. Education, 6. Equal of Opportunities 7. Participation.
The aggregation of these domains contributes to the final classification of the regions.
It is annually published in a report by Sbilanciamoci!.
http://www.sbilanciamoci.org/quars/
Regional Index of In recent years measuring progress at a regional level has raised increasing interest and a first Sustainable effort to calculate ISEW at regional level was proposed by the New Economic Foundation (NEF) in Economic 1994 for the UK regions (see Jackson and Marks, 1994). Welfare (ISEW)
The Sustainable Society Index (SSI) is calculated each year for 151 countries. It has been developed by the Sustainable Society Fundation, based on the Brundland definition. It is based on 24 Sustainable indicators belonging to three wellbeing dimensions: Human, Environmental and Economic Society Index Wellbeing. It shows in a simple way the distance to full sustainability for each of the 24 indicators.
www.sustainablesocietyindex.com
Sustainable national income (SNI) is an indicator for environmental sustainability developed the department of Environmental Statistics a Statistics Netherlands by the economist Roefie Hueting Sustainable around 1970’s. For a given year, it is an estimate of the production level at which - with the National Income technology in the year of calculation - environmental functions remain available ‘for ever’.
http://www.sni-hueting.info/
The Sustainability Index was developed by the Fondazione Eni Enrico Mattei (FEEM). It is an aggregate index which provides current and future projections of sustainability at both a national and macro-regional scale over time. The aim of this index is to summarize and gather different Sustainability information from a selection of relevant sustainability indicators. The aggregation methodology is Index (FEEM SI) based on experts’ elicitation and exploits all the interactions across indicators.
The macro area covered by this index are the following:
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INDEX BRIEF DESCRIPTION
• Economic: R&D, Investment, GDP per capita, Relative Trade Balance; Public Debit; • Social: Population Density, Education, Health, Food Relevance, Energy Imported, Energy Access. Private Health; • Environmental: GHGs Emissions per capita, CO2 Intensity, Energy Intensity, Renewable Energy Consumption, Plants, Animals, Water.
The FEEM SI is built within a recursive-dynamic computable general equilibrium model, ICES-SI (Inter-temporal Computable Equilibrium System for Sustainability Index), which provides elements for deriving each indicator over time and for different scenarios.
http://www.feemsi.org
System of Environmental-Economic Accounting (SEEA) has been introduced by the London Group on Environmental Accounting. It has been adopted as an international standard by the United System of Nations Statistical Commission (UNSC). The SEEA framework follows a similar accounting structure Environmental- as the System of National Accounts (SNA) and uses concepts, definitions and classifications Economic consistent with the SNA in order to facilitate the integration of environmental and economic Accounting statistics.
http://unstats.un.org/unsd/envaccounting/seea.asp
Statistical measure S-time-distance measures the distance (proximity) in time between the points in time when the two series compared reach a specified level of the indicator X. The observed distance in time (the number of years, quarters, months, etc.) for given levels of the indicator is used as a temporal measure of disparity between the two series, in the same way that the observed difference (absolute or relative) at a given point in time is used as a static measure of disparity. It is based on 12 selected indicators from 7 themes of Sustainable Development Index for Time Distance all years: From Theme 1 – Economic Development: Life-long learning, Share of R&D in GDP, Total Method for employment rate, Employment rate, females; from Theme 2 – Poverty and social exclusion: Early Analysing and school-leavers; from Theme 3 – Ageing society: Employment rate of older Workers; from Theme 5 Presenting – Climate change and energy: Total greenhouse gas emissions: Share of electricity from renewable Indicators sources; from Theme 6- Production and consumption Pattern: Municipal waste landfilled (kg per capita); from Theme 8 – Transport: People killed in road accidents, Road share of inland freight transport and from Theme 10 – Global partnership: Official development
http://www.gaptimer.eu/s-t-d_monitoring_tool.html
The World Happiness Index was developed in France by the Project “GLOBECO - Understanding Globalization” in 2001. This index tries to answer the following question: what is a happy world/country?
In order to do this, a list of 40 indices derived by, among others, UNDP, World Bank, WHO, SIPRI, Amnesty, and HC are merged. Selected global indices include: . Peace and security: 1) number of nuclear warheads, 2) number of victims of major armed World Happiness conflicts, 3) military expenditure, 4) number of violent deaths, 5) number of refugees, 6) Index number of victims of natural or technological disasters, 7) corruption, 8) economical and financial security, 9) and 10) probability of dying before age 60;
. Freedom, democracy, human rights : 1) number of people living freely, 2) level of democracy in the world, 3) press freedom, 4) children’s rights: under-5 mortality rate, 5) death penalty, 6) women’s rights: gender development index, 7) percentage of female parliamentarians, 8) women’s school enrolment, 9 and 10) boys and girls’ school enrolment;
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INDEX BRIEF DESCRIPTION
. Quality of life : 1) GDP per capita, 2 p) GDP per capita, disparities, 3) life expectancy at birth, 4) human poverty index, 5) GINI coefficient, 6) suicides, 7) CO2 rate, 8) forest area per capita, 9) water and hygiene, 10) clean air;
. Research, education, information, communication, culture: 1) Research and Development, 2) and 3) boys and girls’ education rate, 4) adult literacy rate, 5) education disparities, 6) number of copies of daily newspapers per capita, 7) Education in underdeveloped countries, 8) Internet, 9) number of movies, 10) international tourist trips.
Results are published once a year on www.globeco.fr, section: “L’indice du Bonheur mondial et le classement par pays” and ranks about 60 countries which represent 90 % of worldwide population and 95 % of global GDP.
www.globeco.fr
Some of the indicators described above have been implemented in several countries around the world. Other indices are, instead, country-specific, having been proposed and implemented by the corresponding governments. The following charts show some countrywide initiatives around the world (Figure 10) and in Europe (Figure 11).
Figure 10: Some countrywide initiatives around the world
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Figure 10: Some countrywide initiatives in Europe.
Better Life Index
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3.2. MEASURES OF WELL-BEING, PROGRESS AND SUSTAINABILITY: DOES AN INTERSECTION EXIST?
The recommendations of the Stiglitz-Sen-Fitoussi report seem to address important weaknesses of the current economic and social statistical system in many countries. As Noll (2011) stressed, the suggestion to utilize subjective indicators for monitoring well-being and progress is in a certain sense innovative in an economic and statistic context, while they are commonly used for social indicators. Moreover, the three overall domains identified in the report for going “Beyond GDP”, are not new in literature because they represent the three pillars of sustainable development, usually defined as economic, social and environmental aspects. In the same article, Noll asserts: “Is all this to say that the Stiglitz-Sen-Fitoussi Report is nothing more than old wine in new skins?” Obviously the answer is no and the report represents a major step forward towards a considerably improved measurement of well-being and social progress.
There is no unanimous consensus on how to classify the “Beyond GDP” initiatives described in the previous section. One of the most common taxonomies divides the indicators in:
a) Economic Indicators,
b) Social indicators,
c) Environmental indicators and
d) Well-being indicators.
The first class contains the GDP indicator and all the indices deriving from it.
Any economic indicator has, as a starting point, the GDP or other figures from the System of National Accounts (The SNA also provides other macro-economic indicators such as the Gross National Product, the Net Domestic Product or Net National ECONOMIC Income). In fact, even if there is a unanimous consensus on criticisms; it is still used as INDICATORS the key indicator for assessing the health of a country’s economy. We refer to this class of indices as Enlarged GDP indicators since it adjusts for some of its shortcomings.
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Generally speaking, adjustments refer not only to the economic framework but, above all, to social or environmental aspects, so that it is possible to classify these indicators in one (or more) of the classes we introduced previously.
SOCIAL These indicators take into account a broad range of social issues among which, life INDICATORS expectancy, poverty rate, unemployment rate, disposable income, education level. Many social indices combine several of these issues to better illustrate the overall social progress of nations.
As the definition suggests, a simple social indicator is Life expectancy, which measures the number of years that a person can expect to live. Usually, in economic empirical applications it is used as a proxy of the health condition of a population. However, as stressed in the following chart, a long life does not necessarily mean a healthy one. Therefore, it seems that a more meaningful measure of social progress should take into account a population’s years of healthy life instead of Life expectancy.
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Figure 12: Life expectancy at birth and healthy life in OECD countries, year 2010.
SOURCE: Our elaboration on Eurostat data (2010)
Usually, when calculating GDP, environmental aspects are not taken into account as negative effects. On the contrary, an increase in pollution can positively affect the final GDP value. This represents an additional drawback of GDP. In fact, in the last twenty years, interest in environment has grown considerably. Consequently, an increasing number of environmental indicators have been generated.
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ENVIRONMENTAL The aim of environmental indicators is to cast light on the state and development of INDICATORS the environment. They combine information on natural resources, such as environmental pollution (such as water or air pollution), waste (solid waste generation), and climate change, together with human health, at local and/or global level.
An example of the environmental indicator is “Urban population exposure to air pollution by ozone”. The following chart shows the differences across countries in the values of this indicator (value is calculated per day) in 2004 and 2010.
Figure 13: Urban Pollution in 2004 and 2010. (µg/m³·day)
Urban population exposure to air pollution by ozone
12
10
8
6
4
2
0
Italy Spain Latvia France Poland Ireland Austria Greece Finland Estonia Sweden Slovakia Belgium Bulgaria Slovenia Hungary Portugal Romania Denmark Germany Lithuania Switzerland Netherlands Luxembourg Czech RepublicCzech United Kingdom Microgramsper cubic metre day (Thousands) EU (27 countries)
2004 2010
SOURCE: Our elaboration on Eurostat data (2010)
Data on Urban Pollution can give a first rough description of the environmental situation of a country even if it is clear that high values of urban pollution are negative because they cause serious health effects. The OECD predicts that urban air pollution will become the top environmental killer by 2050.11 However, if we consider this single indicator we still have only partial knowledge on the real situation of the country under analysis, since it does not provide any information on possible
11 OECD 2012, Environmental Outlook to 2050: The Consequences of Inaction.
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initiatives that have been implemented in that country to reduce it (i.e. if the country has any policies aimed at compensating pollution by planting trees.). However, the “Beyond GDP Project” 12 concludes that the “Ecological Footprint”, which is a measure of human demand on the planet’s eco-
system, gives a more realistic picture.
The last type of indicator is related to social aspects. We refer to this class as “well-being indicators”.
WELL-BEING They are used to illustrate people’s satisfaction about their life or quality of life related INDICATORS to their job, family life, health conditions and standard living. These measures can be both subjective and objective. We refer to subjective well-being if indicators are based on self-reporting by individuals. Objective measures capture, instead, the complexity of life satisfaction by considering variables such as leisure time or disposable income.
Regarding well-being, the Stiglitz-Sen-Fitoussi report strongly recommends to use subjective measures. This approach, however, presents some weaknesses; for instance different people can judge the same situation in different ways. In addition, well-being covers several aspects, as illustrated in the following diagrams:
Figure 14: The many dimensions of well-being.
No clear distinction exists among environment indicators, social indicators and well-being indicators. In fact, most of the indicators belong to all these categories, since an indicator of well-
12 http://beyond-gdp.eu
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being could simultaneously include environmental, economic and social aspects. The following chart illustrates our idea.
Figure 15: An intersection is possible
Using the classification proposed by the Stiglitz-Sen-Fitoussi Commission, the indices introduced in the previous section can be classified as follows:
CLASSIFICATION OF THE INDICATORS NAME OF THE INDEX ECONOMIC SOCIAL ENVIRONMENTAL WELL-BEING
Adjusted Net Savings YES YES YES
Better Life Index YES YES YES YES
Buen vivir (Good Living) YES YES YES YES
Canadian Index of Wellbeing YES YES YES
Capability Index YES YES
Carbon Footprint YES YES
Comparing Welfare of YES YES YES Nations
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CLASSIFICATION OF THE INDICATORS NAME OF THE INDEX ECONOMIC SOCIAL ENVIRONMENTAL WELL-BEING
Corruption Perceptions Index YES
Ecological Footprint YES
EEA Core Set of Indicators YES
Environmentally Sustainable YES YES National Income EU set of Sustainable YES YES YES Development Indicators European Benchmark YES YES YES Indicators Gender Empowement YES Measure (GEM) Gender-related Development YES YES Index (GDI
Genuine Saving Indicator YES YES YES YES
Gross National Happiness YES YES YES YES Index (Buthan)
Happy Life Years YES YES
Happy Planet Index YES YES YES
Human Development Index YES YES YES
Human Poverty Index YES YES
Index of Individual Living YES YES YES Conditions Index of Sustainable Economic Welfare (or YES YES YES Genuine Progress Indicator) JFS Sustainability Vision and YES YES YES Indicators
Living Planet Index YES
MDG Dashboard of YES YES YES YES Sustainability Measure of Domestic YES YES YES Product
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CLASSIFICATION OF THE INDICATORS NAME OF THE INDEX ECONOMIC SOCIAL ENVIRONMENTAL WELL-BEING
Measures of Australia’s YES YES YES YES Progress Measuring equitable and sustainable wellbeing in Italy YES YES YES YES (BES)
Measuring Ireland Progress YES YES YES YES
Measuring National Well- YES YES YES YES being Millennium Development YES YES YES Goals Index National Accounts of Well- YES YES Being Natural Capital Index YES Framework Quality of development at Regional level (QUARS – YES YES Italy) Sustainability Inswx (FEEM YES YES YES SI)
Sustainable National Income YES YES YES
Sustainable Society Index YES YES YES
System of Environmental- YES Economic Accounting Time Distance Method of Analysing and Presenting YES YES YES Indicators
World Happiness Index YES YES
3.3. THE TAXONOMY OF INDICATORS
As we highlighted in previous sections, a wide variety of indicators are presently in use. There are also a number of attempts on how to categorise the indicators according to different purposes. We can categorize these attempts in two way of classification: (i) a random way and (ii) an organized way. One of the first attempt belonging to the former type has been provided by Hagerty et al.
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(2001). The cited authors reviewed 22 different indices of quality of life (hereafter, QOL) and list them with respect to the number of QOL-domains that the indices encompass. More recently, Bandura (2008) presents a survey of 178 composite indices that rank or assess a particular set of countries (such as a geographical region) or all countries in the world, according to some economic, political, social or environmental issues (including security, governance, human right as well as globalization). However, the author do not suggest a particular way to discriminate across indices and she present the inventory simply following the alphabetic order.
With respect to the second way of classification, Bleys (2012) retains that there exist two categories for classifying alternative measures for policy-making. The first one focus on the origins of the different indicators (in terms of academic research fields in which they are defined and implemented) and a second one relies at the objectives for which the indicators have been proposed in the literature. With respect to the origin-based classification, Offer (2003) categorizes the alternative measures into three classes: Extended economic account, Social Indicators and Psychological indicators. The first one was developed especially by economists, with the intend of extending the traditional national accounts including measures of human well-being based on the notion of sustainability. Sociologists mainly developed social Indicators; they were inspired by the crucial limit of all the monetary indicators as indices capable to capture the well-being. Finally, the Psychological indicators were developed by psychologists interested in adding a subjective point of view in the measurement of well-being. Analyzing the limit of GDP as a proxy for well-being, Boarini, Johansson and Mira d’Ercole (2006) adopted a similar classification scheme. Goossens et al. (2007) rearrange measures respect to the main objectives. They classify the indicators in: Indicators adjusting GDP, Indicators replacing GDP and Indicators supplementing GDP. This classification is quite similar to that proposed by Keune, Elzinga and Ruyter. (2006), who categorize indices in complementing, corrective and transformative indicators of human welfare.
An alternative categorization has been provided by Afsa et al. (2008), who divided the indicators into five categories, with respect to their relation with the System of National Accounts (SNA):
(a) GDP and other indicators linked to the SNA,
(b) dashboards or sets of indicators,
(c) corrected income measures and extended national accounts,
(d) non-monetarily aggregated composite indicators
(e) subjective approaches.
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Finally, Bleys (2009, 2012) proposes to categorize indices in three different domains: measures on Well-being, on Economic welfare and on Sustainability. Belonging to the first domain are all the measures of well-being aimed at comprehensively evaluating either a single person’s or a group of people’s life situation. Measures of economic welfare aims at capturing the contribution of a nation’s economy to the overall level of well-being enjoyed by its citizen, while measures of sustainability investigate whether the current levels of well-being and economic welfare can be sustained into the future.
In this section, we present a simple framework to categorize most of the proposed indicators. The aim of this framework is to help users, namely decision-makers, politicians as well as researchers and stakeholders. First, it is necessary to provide some definitions, in order to shine a light on the huge class of terms involved on this topic.
NAME DEFINITIONS
Indicator The European Commission provided the following definition: an indicator is “a description of the project’s objectives in terms of (a single/individual indicator) quality, quantity, target group(s), time and place”. In a similar way, the International Institute for Sustainable Development (IISD) definition: "An indicator quantifies and simplifies phenomena and helps us understand complex realities. Indicators are aggregates of raw and processed data but they can be further aggregated to form complex indices.” Example of traditional indicators are: the unemployment rates, the price index and the life expectancy.
Sets of indicators They consist in putting together series of indicators that can be in a direct or indirect relationship to socio-economic progress (dashboards) and its sustainability. The main criticism of these dashboards is their heterogeneity. They also deliver too much information to be efficient communication tools.
Compound indicators Composite indicators are one way to circumvent the problem raised by the extreme richness of dashboards and to synthesize (composite indicators) their abundant and purportedly relevant information into one single number.
Objective measures Objective measures, which are the most represented among sustainability indicators, attempt to capture objective conditions and opportunities by looking at indicatory variables, such as
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NAME DEFINITIONS
leisure time, health, marital status, education, disposable income, etc. It is a reasonable approach since quality of life to a great extend depends on people’s objective living conditions.
Subjective measures These indicators are based on self-reporting by individuals, which makes it possible to capture direct measures of high complexity such as life-satisfaction. Subjective approaches distinguish between the dimensions of quality of life (like family, work, financial conditions, etc.) and the objective factors shaping these dimensions (sense of purpose, fulfilment of goals, and perception by others, etc.)
Indicators adjusting GDP The indicators adjusting GDP aim to “correct” GDP incorporating a variety of economic, social or environmental factors that are not included in the conventional measure. These indicators can better capture living standards and welfare. In particular, the indicators are adjusted by adding a monetary value to environmental as well as social factors.
An example of such an indicator is the Index of Sustainable Economic Welfare.
Indicators replacing GDP An indicator replacing GDP aim at assessing well-being in a more directly way respect to the GDP. In fact, they include information on life satisfaction or on the achievement of some basic human functions.
The most famous indices aiming to replace the GDP are the Human Development Index, the Gender-related Human Development Index, the Human Poverty Index, the Ecological footprint and the Happy Planet Index.
Indicators supplementing Supplementing indicators include supplementing GDP based on a national accounts system and supplementing GDP setting social GDP and environmental information in relation to GDP. In fact, the aim of a supplementing indicator is to add extra information to the GDP by creating satellite accounts or by connecting the GDP to other social and environmental indicators, for instance by creating a comprehensive indicator set.
Indicators such as the Millennium Developing Goals or the Sustainable Development Indicators belong to the former class.
Complementing of human Indices aiming at completing GDP by looking beyond traditional economic indicators and including ecological and social welfare components.
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NAME DEFINITIONS
Corrective of human welfare We refer to indices Corrective of human welfare those that generally adjust GDP figures in order to account for ecological and social components.
Transformative indicators of Transformative indicators are indicators that focus primarily on human and natural values in the assessment of human welfare, human welfare rather than the monetary values that are mostly used in traditional assessments.
In addition, we also introduce some properties that are desirable for an indicator and offer some recommendations on how to obtain a measure that can better reflect the real progress and well-being of a society. In the following table, we list and explain the most important characteristics that a good indicator should have, according to Fran Bennett and Chris Roche (2000), Yasmin von Schirnding (2002) and OECD (2008).
CHARACTERISTICS DEFINITION AND NOTES
Accurate How close the measurement is to the true value of the parameter; when a large number of measurements are made and averaged, how close the average is to the true value.
Achievable/Feasible The required data can actually be measured and collected. Feasibility should also be examined in terms of institutional capacity, such as in terms of ease of sample selection, availability of specialised personnel.
Based on current Significant academic research should not be required to develop it. knowledge/experience
Comparable Indicators that allow comparison over time and also across countries. Usually, if the indicator is reliable or verifiable, it is comparable. However, this is usually most challenging with qualitative indicators.
NOTE: when an indicator that is reliable for measuring change over time is carried out by that local population, it may not be comparable from one programme location to another
Contextually appropriate The measurements used must be culturally, socially and politically acceptable to the population under study, otherwise they will likely seek to misrepresent information, under- or over-reporting events, or undermining “true” measures.
NOTE: direct questions about household income and assets are often considered intrusive and will yield under- or over-reporting depending on the context.
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CHARACTERISTICS DEFINITION AND NOTES
Cost-effective The cost of data collection is affordable and worthwhile.
Cross checked and The validity of assessment needs to be cross- checked by comparing different indicators compared and progress and by using different informants, methods, and researchers
Diverse and disaggregated There should be a deliberate effort to seek out different indicators from a range of groups, especially men and women. The information needs to be recorded in such a way that these differences can be assessed over time
Easy to obtain/inexpressive Data should be derived from another management process whenever possible. If the data to accumulate cannot be readily collected the indicator has no value.
Effective Sensitive to change and clearly linked to causative factors
Efficient Easily measured and analysed using existing data
Empowering The process of setting and assessing indicators should be empowering in itself and allow groups and individuals to reflect critically on their changing situation.
Interpretable and Locally defined indicators may not mean much to other stakeholders, so they often need communicable to be explained.
Measurable Indicators must be precisely defined so that their measurement is unambiguous. This generally means quantitative (percentage, ratio, number), but can also mean qualitative. If it cannot be measured, it is impossible to tell if changes have caused improvements.
Objective The indicator must be factual – without distortion by opinion, personal feelings, or prejudices. If subjective the sample must be large enough to generate confidence.
Participatory Indicators should be developed together with people best placed to assess them. This means involving stakeholders, local staff as well as common people
Precise How close the measurement is to all other measurements made under similar conditions; repeatability, over the entire range of interest.
Relevant The indicators must provide information useful to the programme/project objectives and help guide decisions that key users will need to make.
NOTE: indicators are not relevant if they are chosen without reference to decision- makers’ needs.
Reliable or verifiable The results should be the same regardless of who collects the data or when the measure is repeated. Dependability, with emphasis on “consistency, the extent to which the measurement device or test yields the same approximate results when utilized repeatedly under similar conditions”.
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CHARACTERISTICS DEFINITION AND NOTES
It is important in order to limit response burden, to meet financial restrictions and to Reuse of data encourage the coherence of the statistical system.
Sensitive Indicators quickly reflect changes in the situation. They must correspond with the frequency of information required for decision-making. Sensitivity implies an evaluation on how well the measurement responds to the stimulus. If sensitivity is too low, opportunities for response will be missed; if too high, false alarms will result.
NOTE: maternal mortality measures are not sufficiently sensitive for programme decisions, so process indicators are used as proxy measures
Specific When indicators measure what they claim to measure and are not confounded by other factors. The problem of different meanings comes up when establishing qualitative scales of measurement. It is also an issue when designing data-collection tools for indicators. Even words such as “family”, “household”, “child”, are very culturally and contextually biased.
NOTE: standard weight-for-age and height-for-age measures are valid indicators of nutrition status, but are not valid measures of food security.
Statistically stable Any statistically significant result is ‘stable,’ in the sense that if the experiment were repeated, one could confidently expect similar results.
Subjective Informants have a special position or experience that gives them unique insights that may yield a very high return on the investigators time. In this sense, consider what may be seen as critical data because of the source value.
NOTE: informants cannot be applicable to all aspects of the current situation
Time bound Indicators should describe when change is expected. An indicator needs to be collected and reported at the right time.
NOTE: an indicator that can tell you only at the end of a project whether you succeeded in meeting certain objectives cannot influence the decision making process.
Valid The indicator must have a direct relationship to the structure, process, or outcome that it is measuring.
Well-defined It is necessary to propose an accurate and consistent definition of the indicator so that data collected by different data collectors over time are not distorted due to the different people involved in data collections. The indicator must be unambiguous.
Source: Adapted from UNICEF M&E Training Resource: “Selecting Indicators: criteria” http://ceecis.org
According to these definitions, most of the indices that we defined at the beginning of the chapter could be categorized as shown in the following table.
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In the following subsections, we present the characteristics of the taxonomy mentioned above in greater detail.
3.3.1. DASHBOARD VS COMPOSITE INDICATORS
It is not easy to capture the multidimensional aspect of life using a single indicator such as the GDP. The most direct way to evaluate this multidimensionality is through dashboards or sets of indicators. The main point with a dashboard is that it is possible to have more information about different aspects of society, while with a sole indicator all this information is aggregated in a single number. Dashboards of indicators developed for measuring progress have a long tradition. A first comprehensive effort to assess social trends at the national level was the report of the US President’s Research Committee on Social Trends in 1933. However, it was only in the 1990s that a dashboard of indicators became the most used tool for measuring progress. More recently, dashboard is used for initiatives that often have a strong environmental focus and it is developed at the local level by groups that use indicators as part of a strategy aimed to mobilize action on specific issues. As stressed above, dashboards of indicators have both advantages and drawbacks as summarized in the following table :
Dashboard of indicators Advantages Shortcomings It highlights change over time in each Information is highly heterogeneous specific dimensions Collections of different indicators do not Minimization of information losses allow a parsimonious representation of quality of life and social progress
Instead, if we are interested in defining a comprehensive index which provides a synthetic analysis of trends in progress within countries, making comparison among these countries possible, it is necessary to follow an alternative procedure defined as the “composite indicators approach”. This approach consists in aggregating a great number of elementary indices that cover a broad spectrum of different dimensions and different aspects of progress (human development, well-being, environmental sustainability, etc.). The main problem with this approach is that it does not provide a unified way of measuring heterogeneous dimensions of well-being. In fact it is possible to aggregate in several distinct ways, introducing a sort of arbitrariness in the procedure.
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Regarding dashboards of indicators, composite indicators have both advantages and drawbacks as illustrated below:
Composite Indicator Advantages Shortcomings Ambiguous results depending on the Synthetic domain covered Ambiguous results depending on the User friendly by policy maker normalization methodology used Ambiguous results depending on weights Comparisons between countries used for aggregation Comparisons over time
An example of composite indicator is the famous Human Development Index (HDI) proposed by the United Nation Development Programm (UNDP) in 1990.
DASHBOARD COMPOSITE INDICATOR
Better Life Index Adjusted Net Savings
Buen vivir (Good living) Canadian Index of Wellbeing
Capability Index Carbon Footprint
EEA Core Set of Indicators Corruption Perceptions Index
EU set of Sustainable Development Indicators Ecological Footprint
OECD Fact Book Economic, Environment and Social Genuine Progress Indicator Statistics
OECD Going for Growth Economic Policy reforms Genuine Saving Indicator
OECD Social Indicators Gross National Happiness Index (Buthan)
Key Environmental Indicators Happy Life Years
Gender Empowerment Measure (GEM) Happy Planet Index
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DASHBOARD COMPOSITE INDICATOR
Gender-related Development Index (GDI) Human Development Index
Index of Individuals Living Conditions Human Poverty Index (HPI)
Measures of Australia’s progress Index of Sustainable Economic Welfare
Measuring equitable and sustainable wellbeing in Italy Living Plant Index (BES)
Measuring Ireland’s Progress Measure of Domestic Product
Measuring National Well-Being Millennium Development Goals Index
National Accounts of Well-Being QUARS
Sustainability Index (FEEM SI)
World Happiness Index
3.3.2. ALTERNATIVE TO GDP VS ADJUSTING GDP INDICATORS
As previously mentioned, a measure of progress could take into account several additional variables that traditional GDP does not measure, such as: health, infant mortality, crime, poverty, income gap (women/men; poor/wealthy), environmental health/decay and destruction of the natural environment (such as long term environmental damage), infrastructure such as highways and bridges, family breakdown, loss of leisure time and so on. For this reason, it makes sense to introduce alternative measures that replace the GDP. The Winnipeg-based International Institute of Sustainable Development Project13 indicates the most important characteristics that an alternative economic indicator should consider. It suggests the following factors:
• Policy relevance; • Simplicity;
13 For a detailed description of the project see http://www.iisd.org/
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• validity; • time-series data; • availability of affordable data; • ability to aggregate information; • sensitivity; • reliability.
However, in some cases, the construction of a new index may require the creation of new datasets or manipulation of available data in order to reuse it in a new way and this could represent a cost.
Alternative GDP measures Advantages Shortcomings Take into account several additional variables that traditional GDP does not Arbitrary selection of factors to include measure High cost for the construction of new
datasets
There is another way of overcoming the shortcomings of the GDP. This approach suggests integrating the GDP with some additional indicators but retaining its original additive structure. A first attempt to apply this procedure was proposed by Nordhaus and Tobin in 1973. The starting point of their welfare measure is not GDP but rather household consumption. This indicator is adjusted in two steps. The first step derives a Measure of Economic Welfare (MEW) by subtracting from total private consumption a number of components that do not contribute positively to welfare (such as commuting or legal services) and by adding monetary estimates of activities that contribute positively to welfare (such as leisure or work at home). The second step converts the MEW in a « sustainable measure of economic welfare » (SMEW) which takes into account changes in total wealth. Some further initiatives took place during the 1980s such as the Economic Aspect of Welfare index (EAW) proposed by Zolotas (1981). The issue was addressed again in the late 80s by Daly and Cobb (1989) who proposed the index of sustainable welfare (ISEW), further refined by Cobb and Cobb (1994). Since 1995, a similar indicator has been proposed by the non-governmental organization “redefining progress”, called the Genuine Progress Indicator (GPI14).
14 ISEW and GPI are often presented as alternative names for the same index.
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Adjusting GDP measures Advantages Shortcomings Problems with the issue of monetization Derived from traditional notion of GDP of environmental and social aspects Uses an extended national accounting Framework Same limitations as those of GDP A flexible framework that can be extended to add additional variables
The most important indices belonging to these two categories are listed in the following table:
ALTERNATIVE ADJUSTING Replacing Supplementing
ISEW (index of sustainable Better Life Index Adjusted Net Saving well-being) and GPI (Genuine Progress Indicator) Canadian Index of Wellbeing Buen Vivir Genuine Saving Indicator
Regional Quality of Development Index Capability Index Genuine Progress Indicator (QUARS) (GPI) Ecological Footprint (EF) or Carbon Carbon Footprint Measuring Domestic Product Footprint
Gender-related Development Index (GDI) Corruption Perceptions Index
Gross National Happiness Index (Buthan) Ecological Footprint
EEA Core Set of Indicators Happy Planet Index
Human Development Index World Happiness Index
EU set of Sustainable Development Measures of Australia’s progress Indicators Gender Empowerment Measure (GEM) Happy Life Index
Living Planet Index Index of Individual living conditions
Measuring equitable and sustainable Measuring Ireland’s Progress wellbeing in Italy
Human Poverty Index Measuring National Well-Being
Millennium Development Goals Index
National Accounts of Well-Being
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ALTERNATIVE ADJUSTING Replacing Supplementing
Sustainability Index (FEEM SI)
The European Environmental Bureau (EEB) suggests in its report15 that emphasis should be given on finding a supplementary indicator to GDP rather than replacing it.
3.3.3. SUBJECTIVE VS OBJECTIVE INDICATORS
Another approach in measuring progress is based on measures of subjective well-being (SWB). The main idea is that answers to personal questions about life become a proxy of well-being. Some authors advocate the use of this type of indices to complement standard GDP measures (Diener, 2000 and 2006, Kahneman and Krueger, 2004 and 2006). However, indicators based exclusively on subjective data are rare, and only a few of them combine subjective and objective measures.
Subjective Indicators Advantages Shortcomings Participation of the Individuals Not a common definition Incomparable over time Incomparable over space
A new direction in evaluating subjective measures is proposed by OECD with the Better Life Index. The main idea of this new index is that it is designed to allow the individual to choose, in a set of key factors (12 dimensions) such as education, housing, environment, and so on, which dimensions contribute to well-being in OECD countries according to the importance that he/she gives to each dimension. A more participative index exists at a national level, proposed by the Italian Statistical Office (ISTAT) and the National Council for Economy and Labour (CNEL). The project for
15 http://www.eeb.org/publication/documents/SDSprogressBriefing-1207.pdf
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measuring equitable and sustainable well-being (BES – “Benessere equo e sostenibile”) is part of the lively international debate on “going beyond GDP”. The idea is that macro-economic measures cannot provide a comprehensive view of societal performance and must, therefore, be combined with additional indicators that reflect the quality of life of citizens, taking into account also inequalities and economic, social and environmental sustainability. The project involved a first selection of the main dimensions by the Scientific Committee, followed by an on-line survey, where it was possible to propose what kind of indicators play a more important role depending on personal taste. Finally, together with the scientific community and civil society, CNEL and ISTAT selected a set of 134 indicators to represent the 12 dimensions of equitable and sustainable well-being. On the other hand, there is wide consensus on the use of objective measures. The most important advantage of objective measures is their reliability, and they are also more egalitarian than subjective ones. Moreover, objective measures are also less influenced by biases. Such indicators cover social, environmental and economic resources that are often measured using existing data sources. Objective indicators have the advantage of being consistent over time and knowledge on their collection is longstanding. People's experience of those objective facts is not taken into
consideration.
Objective Indicators Advantages Shortcomings Valid Not influenced by people’s experience Reliable Biases
The following table shows some of the most famous indicators belonging to these two categories. However, there exist some indicators that are, at the same time Objective and Subjective since they put together objective and subjective variables, for instance with data collected by questionnaires.
OBJECTIVE AND SUBJECTIVE ONLY SUBJECTIVE ONLY OBJECTIVE
Better Life Index (OECD) Corruption Perceptions Index Adjusted Net Savings
Buen Vivir (Good Living) Canadian Index of Wellbeing
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OBJECTIVE AND SUBJECTIVE ONLY SUBJECTIVE ONLY OBJECTIVE
Gross National Happiness Index (Buthan) Capability Index
Happy Life Years Carbon Footprint
Happy Planet Index Ecological Footprint
Measures of Australia’s progress EEA Core Set of Indicators
Measuring equitable and sustainable EU set of Sustainable
wellbeing in Italy Development Indicators Gender Empowerment Measuring National Well-Being Measure (GEM) Gender-related Development National Accounts of Well-Being Index (GDI)
QUARS Genuine Progress Indicator
Genuine Saving Indicator
Human Development Index
Human Poverty Index (HPI)
Index of Individuals Living
Conditions Index of Sustainable Economic
Welfare
Living Plant Index
Measure of Domestic Product
Measuring Ireland’s Progress
Millennium Development
Goals Index
Sustainability Index (FEEM SI)
World Happiness Index
3.3.4. INTERNATIONAL VS LOCAL
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Related to the previous categorization there is the distinction between a measure that is calculated at an international level and at a local. With the term “local”, we refer to measures calculated only for a specific country (e.g. at national level, like the Measuring equitable and sustainable wellbeing in Italy) or at sub-national level (e.g. at regional level, such as the QUARS or the R-ISEW). The main point is that the same indicator may have different meanings if applied in different scales or in different contexts. In fact, an index calculated at a national level as an average of regional values could mask regional disparities and inequality at sub-levels. Also, results obtained at a regional level could not be comparable across different countries.
International Advantages Shortcomings Loss of information specific to the local Comparable across countries scenario
What is a shortcoming at the International level becomes an advantage for the application at regional level and vice versa, as reported in the following table.
Local Advantages Shortcomings A better picture of the society under Not always comparable across countries examination. Availability of data and parameters for estimating reliable and comparable applied at the local dimension, especially for "global" phenomena such as pollution and so on.
International Local
Index of Sustainable Economic Welfare (ISEW) Index of Sustainable Economic Welfare (R-ISEW)
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International Local
Adjusted Net Savings (or Genuine saving) Buen vivir (Good living)
Better Life Index (OECD Canadian Index of Wellbeing
Capability Index Gross National Happiness Index (Buthan)
Carbon Footprint Measures of Australia’s Progress
Measuring equitable and sustainable wellbeing in Italy Corruption Perceptions Index (BES)
Ecological Footprint QUARS
EEA Core Set of Indicators Measuring National Well-Being
EU set of Sustainable Development Indicators
Gender Empowerment Measue (GEM)
Gender Related Development Index (GDI)
Genuine Progress Indicator
Genuine Saving Indicator
Happy Life Years
Happy Planet Index
Human Development Index
Human Poverty Index (HPI)
Index of Individuals Living Conditions
Living Plant Index
Measure of Domestic Product
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International Local
National Accounts of Well-Being
Millennium Development Goals Index
Sustainability Index (FEEM SI)
World Happiness Index
Measuring Ireland’s Progress
3.4. GRAPHICAL REPRESENTATIONS
This last section presents some graphical representations of the taxonomy we introduced previously. In particular, we show that depending on the aim of the analysis it is possible to use some indices that well reflect the phenomenon.
The following charts show what indicators remain selected if we impose the indices to satisfy some particular properties.
No index is both dashboard and adjusting to GDP at the same time. On the contrary, four indicators are obtained that are simultaneously dashboard, alternative to GDP, applicable at country level and objective, as shown in the following diagram.
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- Buen Vivir (Good Living) - Measures of Australia’s progress Not Only Dashboard Alternative Local - Measuring equitable and Objective sustainable well-being in Italy (BES) - Measuring National Well- Being
Depending on the characteristics that decision makers consider as fundamental for an index of well-being and progress, it is possible to obtain one or more indices using our taxonomy.
The following tree chart graphic applies our taxonomy:
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Figure 16: A graphical representation of the taxonomy
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“Not everything that counts can be counted, and not everything that can be counted, counts”.
Albert Einstein, (1879-1955)
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4. RECOMMENDATIONS AND RELATED PROPOSALS
In the previous chapters, we provided an overview of a wide class of indices used in the literature to describe the progress of a society under several domains: economic, social and environmental. As already mentioned, in the last two decades a wide variety of indicators has been proposed by economists, sociologists and politicians, and in the previous chapter we suggested a possible categorization of all these indicators. However, as already mentioned, the Stiglitz-Sen- Fitoussi Commission did not indicate a single synthetic indicator able to summarize all the various aspects of well- being. Moreover, they pointed out the need to improve, adjust and complement GDP with indicators that concisely incorporate social and environmental achievements and setbacks. In addition, the European Commission in the communication titled “GDP and beyond: Measuring progress in a changing world” proposes to implement the following five key actions, aiming at creating or improving indicators to pinpoint, better represent and measure the citizen life conditions:
. Complementing GDP with environmental and social indicators; . Gathering near real-time information for decision-making; . Providing more accurate reporting on distribution and inequalities; . Developing a European Sustainable Development Scoreboard; . Extending national accounts to environmental and social issues.
In the following sections we propose some suggestions and recommendations on how to define a good indicator or set of indicators aimed at monitoring progress and well-being of a society. In defining our proposal we have been inspired by the most relevant recommendations suggested in the several reports and conferences carried out under the various European initiatives.
In our opinion, before developing new sets of well-being indicators, we first need to find an agreement at a European level about what features an indicator of well-being should have, one of the most important being that it should be understandable and acceptable by stakeholders (common people, politicians, researchers).
In the following sections, we illustrate some topics on which, in our opinion, researchers should invest more in the future.
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4.1. RECOMMENDATION 1: TIME USE
As stressed by the US biographer and poet Carl Sandburg (1878 - 1967): “Time is the coin of your life. It is the only coin you have, and only you can determine how it will be spent. Be careful lest you let other people spend it for you.” This quote suggests that the “time-use” dimension plays an important role in the evaluation of well-being.
Usually, the world “time use” denotes the allocation of one’s own time among various circumstances and subjective states. It counts the hours spent working in specific paid occupations as well as unpaid work in private households or in volunteer groups.
The importance of time-use in the measurement of well- being is also stressed in a survey carried out by the Centre for Time- use Research16. Authors show that time use is a key social indicator, which finds specific applications in the assessment of individuals’ material welfare and well-being. It can also provide measures of the extent, duration and purposes of access to leisure activities, or of information technology use.
Time-use can be measured in several ways. The easiest is to refer to time-use items/questions such as “How much time do you usually spend in…?”. However, in order to evaluate whether time spent in a particular activity is considered adequate for the interviewees, one can formulate questions such as “How much time would you like in this activity?”. In Krueger (2009) a National Time Accounting (NTA) was proposed as a set of methods for measuring, categorizing, comparing, and analysing the way people spend their time, across countries, over historical time, or between groups of people within a country at a given time.
In our opinion, time-use is a key social indicator that should be included in the assessment of individuals’ material welfare and well-being. However, including information on time-use could sometimes produce problems in cross-countries and over-time comparisons because people in different countries could use their time in different ways since they have different daily routines.
16 Time-Use Surveys and the Measurement of National Well-being by Jonathan Gershuny, Centre for Time-use Research (Department of Sociology - University of Oxford, 2011).
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4.2. RECOMMENDATION 2: POVERTY AND INEQUALITY
The distributions of income, wealth and consumption are very unequal among individuals in a given society and among countries. Therefore, Kolm (1969) proposed to adjust GDP and household income, by weighting the average income of each decile of the distribution by a coefficient17 that represents the degree of social aversion to inequality.
Inspired by the recommendations included in the Stiglitz-Sen-Fitoussi Report, the United Nations Development Programme (UNDP) proposed in 2010 in their Human Development Report a modified version of the Human Development Index. As stated in their webpage18 the Inequality Adjusted Human Development Index (IHDI) “takes into account not only the average achievements of a country on health, education and income, but also how those achievements are distributed among its citizens by “discounting” each dimension’s average value according to its level of inequality”. Under perfect equality, the IHDI is equal to the HDI, but it falls below the HDI when inequality rises.
Using a weighted income (or wealth or consumption) would make it possible to obtain a more realistic assessment of well-being, compared to indices that only consider conventional per- capita income (or wealth or consumption).
17 A higher value for this coefficient implies a higher degree of aversion to inequality. 18 http://hdr.undp.org/en/statistics/ihdi/
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4.3. RECCOMENDATION 3: HUMAN CAPITAL AND SOCIAL CAPITAL
As stressed in the OECD report (1998), “for growth and prosperity to be sustainable, social cohesion is required; here too, the role of human capital is vital. These tenets are now increasingly accepted” (OECD, 1998, p. 91). The cited report represents one of the first attempts to describe the latest evidence covering investment in human capital and its impact on growth and well-being. It also provides identification of the role of human and social capital in achieving sustainable economic and social development.
Human capital is defined as knowledge, skills and attributes possessed by individuals.
By contrast, OED defines Social capital as “networks together with shared norms, values and understandings that facilitate co-operation within or among groups”19.
There is unanimous consensus that an improvement in societal well-being requires adequate investments in human and social capital, since usually the effects of human and social capital on well- being take a long time to manifest. From this point of view, in our opinion, monitoring human as well as social capital represents a key factor in analysing well-being. Therefore, official statistics should include specific indicators to assess both types of capital over time and across countries.
19 http://www.oecd.org/insights/37966934.pdf
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4.4. RECOMMENDATION 4: VULNERABILITY TO POVERTY
In the economic literature, vulnerability is defined as the potential for people to fall into poverty or chronic poverty. The World Bank denotes vulnerability with the probability, today, of being in poverty or falling into deeper poverty in the future. Moreover, vulnerability is both a cause and symptom of poverty; as a consequence, providing a measure of vulnerability is not easy.
We think that a good indicator of well-being should also consider the individual or familiar vulnerability to poverty.
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4.5. RECOMMENDATION 5: UNEMPLOYMENT
During the “Thirteenth International Conference of Labor Statisticians” in 1982, the International Labour Organization (ILO) adopted the following definition of unemployment: “Unemployment (or joblessness) occurs when people are without work and are actively seeking work”.20 The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labour force.
Clark and Oswald (1994) showed that individual unemployment has strong negative effects on subjective well-being (effects both on physical health and on mental health). In particular, it is also clearly understood that the negative effect of unemployment on well-being goes well beyond the effect that income loss associated with unemployment can generate. Indeed, as observed by Winkelmann (2006), the non-pecuniary costs of unemployment seem to exceed by far the pecuniary ones. Therefore, we regard unemployment as one of the key factors that should be taken into account when evaluating well-being.
20 See http://www.ilo.org/public/english/bureau/stat/download/res/ecacpop.pdf for the complete “Resolution concerning statistics of the economically active population, employment, unemployment and underemployment”.
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4.6. RECOMMENDATION 6: TRANSFERS IN KIND
When measuring well-being, transfers in kind such as social transfers in kind from the government to households (goods and services financed by government in education, health, housing benefits, etc.) should be taken into account. One of the main conceptual problems of this approach, however, is the evaluation of consumption of goods and services provided through social transfers in kind by the government. The current definition of income excludes most social transfers in kind. In national accounts, in-kind services are captured by adjusted household disposable income. We think that social transfers in kind should assume a key role in measuring well-being in the same way as individual consumption. We also believe that it is necessary to improve comparability across countries and over time.
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4.7. RECOMMENDATION 7: IN REAL TERMS
GDP is usually expressed in nominal terms. Nominal value refers to an economic value expressed in fixed (units of a currency) nominal money terms in a given time (years or period). By contrast, real value adjusts nominal value to remove effects of general price levels on price changes over time. Real value is a measure of purchasing power net of any price change over time. For aggregate measures of output, such as GDP, the nominal amount reflects production quantities and prices in that year, whereas real amounts in different years reflect only changes in quantities.
In our opinion, in order to make comparisons across countries and over time, all monetary items should be computed in real terms.
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4.8. RECOMMENDATION 8: HAPPINESS AND SUBJECTIVE WELL-BEING
An alternative approach in the measurement of well-being is based on surveys21. It is a subjective approach and consists in asking a representative sample of people how satisfied they are with their lives. This kind of measure has several methodological difficulties; for example, surveys could be influenced by linguistic or cultural differences. The great importance of subjective well-being and its identification as a key element for the assessment of quality of life has been broadly stressed in the Stiglitz-Sen- Fitoussi- Report22. Following these considerations, on 20 March 2013 the OECD released its “Guidelines on Measuring Subjective Well-being”.23 The Handbook was jointly prepared by academic experts, national statistical offices, and policy makers. As stressed by Conal Smith24: “The last ten years have seen the measurement of subjective well-being take a central role (having been a niche academic interest) in work to better measure the progress of societies. With high quality official statistics on subjective well-being coming on stream over the next few years, the next decade
promises to be even more interesting”. We agree with the importance of monitoring also subjective measures of well-being and we hope that National Statistical Offices will put more effort in producing such integrated measures.
21 See: OECD pages for an illustrative examples of subjective well-being measures: http://www.oecd.org/statistics/Pages%20from%20Guidelines%20on%20Measuring%20Subjective%20Well- being-Annexe-A.pdf 22 “Recommendation 1: Measures of subjective well-being provide key information about people’s quality of life. Statistical offices should incorporate questions to capture people’s life evaluations, hedonic experiences and priorities in their own surveys.” 23 http://www.oecd.org/statistics/guidelines-on-measuring-subjective-well-being.htm 24 Conal Smith is the OECD Leader on the Development of International Guidelines on the Measurement of Subjective Well-being.
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4.9. RECOMMENDATION 9: HOUSEHOLD PERSPECTIVE
As we are moving from GDP to a set of indicators that could better reflect individual well-being, we think that the household perspective plays a fundamental role. The importance of household perspective has also been stressed by Giovannini et al. (2009). Since the notion of well-being mainly refers to the situations of households, the authors recommend to look “at the economic resources of individuals and households” and take into account “the goods and services that people receive free of charge from the government and from non-profit institutions (NPIs)” because in this way it is possible to have a more in depth description of their well-being. They advise to use three traditional indicators involving income/consumption that are: household disposable income per capita, household final consumption per capita, and actual household consumption per capita. Moreover, as family composition has been changing in last decade and new types of families are emerging (for instance “single mothers”)25, we believe that also family composition should play an important role in the definition of well-being indicators.
25 see, OECD Family Database www.oecd.org/els/social/family/database
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4.10. RECOMMENATION 10: DEMOCRATIC PARTICIPATION
Democratic participation occurs when citizens participate in political activities, express political views, and foster political knowledge.
So doing, a fair democratic practice occurs when all citizens have the ability to affect political decision- making and suggest initiatives that better reflect common goods and needs of their community.
There are several initiatives involving democratic participation: the U.K. Office for National Statistics (ONS) in November 2010 launched the "Measuring National Well-being (MNW) programme" intending to provide a fuller understanding of “how society is doing” by directly asking people. It started with a national debate on “What matters to you?” in order to better identify what should be included in a national index of well-being. The primary aim of the programme is to develop and publish an accepted and trusted set of National Statistics that helps people to understand and monitor national well-being.
A similar initiative was proposed in 2011 by the Australian Bureau of Statistics (ABS) to improve the Measures of Australia's Progress (MAP) launched in 2002. ABS is carrying out a community consultation about whether MAP continues to be relevant and provides information on the issues Australians care about. The consultation process is referred to as MAP 2.026. As part of the consultation, ABS launched the MAP 2.0 Blog27. It provides a way for the public to contribute to the consultation. The blog also contains posts by prominent Australians who talk about what progress means to them. These posts are designed to stimulate public interest and debate.
26 http://www.abs.gov.au/AUSSTATS/[email protected]/mf/1370.0.55.001 27 http://blog.abs.gov.au/Blog/mapblog2010.nsf/dx/map2011.htm
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More recently, in May 2011, the Organisation for Economic Cooperation and Development lunched the Better Life Index (BLI). The index aims at comparing the 34 OECD countries28 on the base of 11 dimensions.29 One of the most relevant aspects of this index is that each user, through the BLI website30, can investigate how each of the 11 dimensions contribute to the overall well- being, and then choose his own weighting scheme in order to construct his own index.
At country level, the Italian Institute of Statistics (ISTAT) and the National Council for Economics and Labour (CNEL) involved several experts, as well as the Italian society itself, in the debate on what they consider to be the various aspects of well-being (health, environment, employment, economic conditions, etc.).
All these initiatives demonstrate the importance of involving people in defining dimensions and aspects of well-being. We believe that in the future it will become even more important to organize meetings and round tables in order to foster discussions and exchange views between citizens and experts.
28 The members of the OECD plus Brazil and Russia 29 The dimensions have been chosen on the basis of relevance and data quality as well as in consultation with OECD member countries. 30 http://www.oecdbetterlifeindex.org/
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4.11. RECOMMENDATION 11: SMALL AREAS AND REGIONAL DIMENSIONS
Even if the ability to produce international comparisons is one of the main objectives of indicators, we think that the regional dimension should be equally important. There are many advantages in calculating well-being indicators at local (national or regional) level. The first one is that at a local level, it is possible to capture regional disparities and inequalities at sub level, which the average used to calculate the same indicator at national level could hide. An additional advantage is that it gives a better picture of the society examined. Local evaluations also help policy makers to address more efficient policies.
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4.12. RECOMMENDATION 12: SUB-GROUP DECOMPOSABILITY
It is very interesting to determine whether a specific characteristic or dimension changes its distribution across some segment of the population (for instance among young people or women…).
In recent years there has been increasing interest in defining indices that could be decomposed to capture differences between and within groups.
For example, the Better Life Index (BLI) proposed by OECD is composed by several dimensions that are not available at a more disaggregate level; in other words, they do not allow comparisons of disparities within a country or between various social groups (e.g. men vs. woman, youth vs. elderly). But, as stressed in BLI web page31: "depending on data availability, future editions of the index may have his feature”.
31 www.betterlifeindex.eu
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4.13. RECOMMENDATION 13: SUBJECTIVE WEIGHTS
Defining a composite indicator raises the problem of how to weigh single dimensions and, therefore, how to assess the substitutability among them. When the Human Development Index was formulated in 1990, the United Nations Development Program (UNDP) decided to put equal weights at three specific dimensions (income, life expectancy and education). Choosing equal weights implies considering a sort of substitutability among dimensions. It is clear that the choice of how to give weights to dimensions is crucial. An aggregation of increasing (or decreasing) single indices may globally increase (or decrease) the final value of the aggregated index depending on the weights adopted. There are several ways to overcome this drawback; for instance, it is possible to give weights depending on the estimated coefficients obtained from a regression model (i.e. the Quality of life Index proposed by The Economist’s Intelligence Unit in 200532). A second way consists in using a democratic participation of citizens (dialogue procedure), whereby a public debate leads to a consensus on the dimensions to be used and on the corresponding weights to be given. It is also possible to assess weights resulting from surveys on the dimensions that people feel are the most important to them (i.e. the Canadian Personal Security Index computed aggregating economic security, health security and physical security). In this case, weights coincide with the corresponding frequencies for each dimension.
Therefore, assessing weights is not an easy process and it is necessary to invest in that direction. The three above-mentioned ways of putting weights to different dimensions have some drawbacks, expecially the second one. In fact, if at local (country or regional) level it is possible to assess weights in a subjective (participative way), problems arise for national as well as international comparisons, since it is rather difficult to imagine a procedure that could generate universally valid results. A similar problem arises with comparisons over time since what is important for people today could be less inportant for the same people tomorrow.
32 Available at: http://www.economist.com/media/pdf/QUALITY_OF_LIFE.pdf
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Moreover, even if we agree with the recommendations made by the Stiglitz-Sen-Fitoussi Commission (“it would theoretically be possible to assign different weightings to the different countries, but this would make the choice of weightings even more difficult and would prevent any comparison across countries”) we think that putting subjective weights at local level, obtained by involving the whole community, could generate a more realistic picture of the region under examination.
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4.14. RECOMMENDATION 14: SMALL NUMBER OF INDICATORS FOR DASHBOARD
Composite indicators have the advantage of condensed information, as the numbers obtained after the aggregation procedure are easy to read and use; however, the extreme synthesis that they provide is, at the same time, a drawback, because we lose most of the observed information. In our opinion, a dashboard of indicators is a better way to collect information about the phenomenon. A dashboard of indicators reflects the multidimensional nature of the notion of well-being. However, using a very large number of specific indicators should be avoided. In fact, if on the one hand, the number of collected indicators increase and information about the system becomes more accurate, on the other, it is very important not to resort to too many of these indices since, as asserted in the report by Clerc and al (2011), “the essential is not drowned in data”. Therefore we think it is necessary to choose a relatively small number of indicators to be included in a dashboard in order to obtain a more comfortable overview of the phenomenon.
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4.15. RECOMMENDATION 15: MONETARY TRANSLATION
We agree with the statement included in the Stiglitz-Sen-Fitoussi report affirming that not all indicators can be expressed or can translate into monetary indicators. Moreover, several difficulties arise if we try to evaluate quality (of goods, environment etc.) instead of quantities. If we use market prices to evaluate quantities, we are implicitly assuming that prices are representative of the marginal contributions of the different goods consumed compared to the utility of individuals. Although this monetisation would admittedly have the advantage of allowing easy aggregation among dimensions, we believe that this type of aggregation does not always provide more information than keeping the indicators separated and with their own original unit.
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“Please be good enough to put your conclusions and recommendations on one sheet of paper in the very beginning of your report, so I can even consider reading it”
Winston Churchill, (1874-1965)
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5. CONCLUSIONS
In the last years, there has been an increasing interest in defining, constructing and calculating composite indices as well as dashboards of indicators of economic, environmental and social well-being at different levels (international, national and local level), based on data collected with an objective or a subjective methodology.
It is true that this current interest has been amplified after the Stiglitz-Sen-Fitoussi Commission’sreport. The members of the Commission emphasised the necessity to overcome GDP drawbacks focusing on the well-being of the individuals rather than on the production. However, the well-being of a population is not easy to define or measure since it involves material and non- material components. In fact, people need a certain level of income that allow them to provide food and accommodation. But, at the same time, they also need to live in a nice place, have a good health, healthy environment and time for social relationships, as resumed by Helen Clark, the UNDP Administrator: “Equity, dignity, happiness, sustainability – these are all fundamental to our lives but absent in the GDP (…) Progress needs to be defined and measured in a way which accounts for the broader picture of human development and its context” (UN Conference on Sustainable Development, Rio de Janeiro, Brazil, 20 June 2012).
However, among researchers and stakeholders there has been no agreement yet on what is the “best solution” and a broad discussion is taking place about which indicators should be used to measure well-being and which dimensions should be measured. As task of the UNIVPM for the EU FP7 project “e-Frame - European Framework for Measuring Progress” (2: Alternatives to GDP and to macro-indicators), this report aimed at providing a comprehensive analysis of state of the art in the research on alternative measures to GDP. We provided at first a definition of GDP together with a discussion of its drawback as a measure of progress and well-being (chapter two). We synthesized the most common indices suggested in the recent literature to overcome GDP limits and we introduced a taxonomy to categorize the “besides and beyond GDP” indicators (chapter three). Finally, we proposed several recommendations on the desirable properties for indicators of well- being (chapter four).
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ACKNOWLEDGEMENTS
The authors are very grateful to Francesco Balducci, Alessandra Coli, the member partner of the Romanian Academy and the participants of the workshop on “New National Accounts Architecture” held in Bucarest on November 11-12, 2013 for their useful comments and suggestions.
The views expressed in this document are solely those of the authors.
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WEB PAGES OF RELATIVE PROJECTS
Australian Bureau of Statistics: http://www.abs.gov.au/
Australian Bureau of Statistics - Measures of Australia's Progress: http://www.abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/1370.0~2010~Main%20Features~Home%20page%20(1)
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BRAINPOoL Project, Bring alternative indicators in to policy: http://www.brainpoolproject.eu/
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Canadian Index of Wellbeing: https://uwaterloo.ca/canadian-index-wellbeing/
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E-FRAME: European Network on Measuring Progress: http://www.eframeproject.eu
Equitable and Sustainable Well-being (Benessere Equo e Sostenibile - Bes): http://www.misuredelbenessere.it/
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European Commission, Indicators for monitoring the EU Sustainable Development Strategy: http://epp.eurostat.ec.europa.eu/portal/page/portal/sdi/context
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Fondazione Eni Enrico Mattei (FEEM) Sustainability Index: http://www.feemsi.org/pag/project.php
GESIS – Leibniz Institute for the Social Sciences: http://www.gesis.org/unser-angebot/daten-analysieren/soziale- indikatoren//data/eusi/index.htm
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Global Footprint Network – Carbon Footprint: http://www.footprintnetwork.org/pt/index.php/GFN/page/carbon_footprint/
GLOBECO Understanding Globalisation: www.globeco.fr
GPI Atlantic: www.gpiatlantic.org
GPI Atlantic - Genuine Progress Index for Atlantic Canada: http://www.gpiatlantic.org/
Happy Planet Index: http://www.happyplanetindex.org/
Information on Daily Sources of CO2: http://www.co2list.org/files/carbon.htm
International Institute for Sustainable Development: www.iisd.ca
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In stream Project: http://www.in-stream.eu/
National Government of Ecuador - Good Living Strategy: http://plan.senplades.gob.ec/
New Economic Foundation (NEF) - National Accounts of Well-being: http://www.nationalaccountsofwellbeing.org/
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New Economic Foundation (NEF) - The Happy Planet Index, An index of human well-being and environmental impact (2006): http://www.neweconomics.org/publications/happy-planet-index
Organisation for Economic Co-operation and Development (OECD): www.oecd.org/
Organisation for Economic Co-operation and Development (OECD) – Better Life Index: http://www.oecdbetterlifeindex.org/
Organisation for Economic Co-operation and Development (OECD) – Measuring Progress: www.oecd.org/measuringprogress
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PBL Netherlands Environmental Assessment Agency (PBL) – Sustainable quality of life: http://www.pbl.nl/en/publications/2007/Sustainablequalityoflife
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United Nations Development Programme - Gender Inequality Index (GII): http://hdr.undp.org/en/statistics/gii/
United Nations Development Programme - Gender-related Development Index (GDI) and Gender Empowerment Measure (GEM): http://hdr.undp.org/en/statistics/indices/gdi_gem/
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