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 Project SSH.201162-1 290520 UNIVPM - Deliverable D3.1 2 Project SSH.201162-1 290520 Deliverable D3.1 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”) UNIVPM - Deliverable D3.1 3 Project SSH.201162-1 290520 UNIVPM - Deliverable D3.1 4 Project SSH.201162-1 290520 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 UNIVPM - Deliverable D3.1 5 Project SSH.201162-1 290520 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 UNIVPM - Deliverable D3.1 6 Project SSH.201162-1 290520 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 UNIVPM - Deliverable D3.1 7 Project SSH.201162-1 290520 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