In our last installment of Dissect-o-Stat, we talked about defining things by what they are not, and we decided that doing so was a pretty bad idea. Well, this week we are going to start by discussing what the Genuine Progress Indicator is, but we will also spend some time discussing what it is not.

The Genuine Progress Indicator (we'll call it GPI from here on out), like most ideas, has deep and complex roots. However, those roots had taken hold enough to support a genuine economic performance metric by the late 1980s, after a woman named Marilyn Waring started studying something called uneconomic growth (there we go again - defining things by what they are not). Together with Herman Daily of the World Bank (Waring worked for the United Nations), Waring noticed that certain economically measurable activities were carried out not because they contributed to human well-being, but because they mitigated the negative impacts that humans had on each other and on the environment.

For instance, when the oil tanker Valdez spilled 30 million gallons of oil into Prince William's Sound, Exxon spent a lot of money and organized a lot of resources to clean up the area. All that effort didn't make anyone's life better, though. It just made the lives of a few birds and fishes and otters slightly less bad. To Waring and Daly, it seemed counter intuitive, then, that this type of activity would be counted as "good" by traditional measures of economic growth. Same goes for things like rebuilding houses after hurricanes, keeping up with rising health care costs, increasing audit requirements in response to accounting scandals, and building machines that recapitulate natural services such as water purification.

Like its earlier and sometimes maligned cousin, Gross Domestic Product, GPI begins by measuring the amount of stuff individual people in a given country consume. GPI first measures the things we, as individuals, buy. It then adds or subtracts approximated values for a number of activities not captured by GDP. First, GPI adds in the value of time people spend raising children, doing housework or volunteering. These activities are not recognized by GDP calculations because they do not result in a monetary exchange -- by definition, volunteers don't get paid for what they do. Yet their work still produces value, and so those who rely on GPI approximate and include its value in their measure of economic prosperity. Same goes for the value of services provided by durable goods and travel infrastructure (things like streets and highways).

Then, GPI strips out the amount of money we as a country spend on various non-beneficial services every year. These include "defensive expenditures," defined as money spent to mitigate the effects of things like crime, auto accidents, or pollution. So when people buy a water filter or a security system, GPI counts the cost of that item as a negative value, whereas GDP counts it as a positive value.

GPI then also subtracts out national social costs, such as the cost of divorce, crime, or loss of leisure time. And, finally, GPI subtracts out the value of environmental losses that occurred during the year by approximating the value of things like filled-in wetlands and the use of non-renewable energy.

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So, where does this all get us? Does all this monkeying around with approximate values really get us anywhere? I mean the amount of money the giant American economic machine spends on consumer goods must dwarf the cost of divorce every year. Below you'll find a chart depicting the difference between GDP and GPI since 1950.



You can see, there's quite a big difference. What's driving this difference? Let's start at the beginning. In 2002 the total value of consumer goods we purchased was roughly $6.5 trillion. The next three largest numbers in the GPI calculation are: the value of housework and parenting (add $2.1 trillion); depletion of non-renewable resources (subtract $1.6 trillion); and "other long-term environmental damage," which does not include things like air and water pollution as those are counted individually (subtract $1.2 trillion). Those factors all in, we end up at a value of $5.8 trillion, or, to put it another way, we are getting a return of about 90 cents on the dollar when we spend on consumer goods.

GPI goes on to make several more additions and subtractions, ranging from the fairly large (loss of wetlands, $418 billion) to the very small (noise pollution, $7 billion). The most interesting thing about many of the numbers included in the GPI is their size relative to one another: the only measure less significant than the cost of crime (about $32 billion) is the cost of noise pollution ($7 billion). The cost of crime is only half of the cost of family breakdown. It is also less than 10% of the cost of lost leisure time. For a comprehensive look at the data, click here.

After all is said and done, we end up with a GPI per Capita in 2002 about a third the size of GDP. GPI in 2002 was also less than it was in the late 1970s, the time period immediately following the enactment of the US's major environmental laws.

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So. Progress. Genuine progress. We can't begin to define that until we start to think about what we, as a nation, are progressing toward. We've long looked toward ideals such as equality, opportunity and independence. Those ideals are relative. One person's equality, by definition, is dependent on someone else's. Because it is a large, national economic measure, GPI lacks the ability to acknowledge the relative aspects of progress. Sure, filling in wetlands has a cost to the nation, but its local effects are much stronger: the person who got the new house benefited immensely from filling in those wetlands, while the person whose house is flooded by the new water drainage patterns resulting from the filled-in wetland really got a raw deal and the guy who lives on top of the hill was not affected at all.

It's not impossible to measure the relative economic opportunity that different people have. It is also not impossible to measure the access people have to goods and services that encourage equality, opportunity and independence. Of course we will have to approximate those things, but that's how economic measures work. In fact, we inherently approximate those things, whether we state their approximate value (the way GPI does) or consider it to be zero (the way GDP does).

How many people have access to education? To social networks that allow economic stability? How easy is it to get a living without surrendering your paycheck to an oil company? Can you get off the grid? Do parents have the time, resources and knowledge to raise their children properly?

It is interesting that we don't typically value things like parenting when they are done on an individual basis. After all, we are an economy founded on notions of individualism and entrepreneurship. Yet once we put an organization around that activity -- say by starting a nonprofit devoted to childcare or mentoring -- we start to measure the value of that activity.

GPI, when compared to GDP, paints a pretty bleak picture of improvements in the well being of individuals in America over the last 50 years. The unfortunate thing is that measuring things like access to education or ability to live independently of America's consumer infrastructure will probably paint an even bleaker one.

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