Measuring what matters and guiding policy: An evaluation of the Genuine Progress Indicator

• Date: 01 March 2020
• DOI: http://doi.org/10.1111/ilr.12153
• Author: Günseli BERIK
• Published date: 01 March 2020

Copyright © The author 2020

Journal compilation © International Labour Organization 2020

International Labour Review, Vol. 159 (2020), No. 1

* University of Utah, email: berik@economics.utah.edu. The author gratefully acknowledges

the useful comments of Clair Brown, Gabriel Lozada, Uma Rani and three anonymous reviewers.

Responsibility for opinions expressed in signed articles rests solely with their authors, and

publication does not constitute an endorsement by the ILO.

Measuring what matters

and guiding policy: An evaluation

of the Genuine Progress Indicator

Günseli BERIK*

Abstract. This article examines the Genuine Progress Indicator (GPI), which seeks

to respond to the shortcomings of GDP and the main contemporary challenges to

welfare. As a monetary indicator, the GPI is uniquely suited to evaluate the im-

pact of policy proposals and its dashboard-like features are able to track changes

in contributing variables. While the GPI is currently not available for use in cross-

country analyses, it will be measurable using a standard methodology once certain

data issues have been resolved and a consensus is reached on GPI 2.0. Currently,

the main obstacles to its widespread use are lack of political leadership and insti-

tutional support.

Keywords: economic evaluation, measurement system, gross domestic product,

cross cultural analysis, well-being, economic development, methodology.

Concerns about the limitations of using per capita gross domestic product (GDP)

as a measure of welfare have prompted eorts to develop alternative aggre-

gate indicators of well-being. The most prominent of these are the Human

Development Index, the Happy Planet Index, the Happiness Indicator, the Bet-

ter Life Initiative and the Genuine Progress Indicator. However, each of these

“beyond-GDP” alternatives has theoretical or practical shortcomings as an indica-

tor of welfare. Moreover, some of them fail to respond to the criticisms of GDP

or are ill-equipped to address the modern-day challenges that can adversely

aect well-being (such as climate change, ecological degradation and changing

labour dynamics). Hence the value of using a broad measure of welfare that

reects these concerns.

The Genuine Progress Indicator (GPI) is a comprehensive welfare indicator

that incorporates economic, environmental and social components. It has at-

tracted attention for its potential to assess sustainability, shared prosperity and

International Labour Review

72

quality of life (Brown, 2017) and to “delegitimize” the dominant GDP-growth-

centric measurement of well-being (Held et al., 2018, p. 39 8). It is the subject of

a growing number of studies and of methodological innovation. The time has

therefore come to assess its potential as an aggregate indicator informing pol-

icy proposals.

The rst section of this article thus tracks the development of the measure-

ment of economic welfare, comparing the extent to which each major beyond-

GDP indicator responds to the shortcomings of GDP and the main contemporary

challenges to welfare. The second section examines the case for using the GPI,

identifying both the criticisms that have been levelled at it and its contributions

to assessing the current welfare landscape, focusing on income inequality, care

for the environment, unpaid care work and concerns about the future of work.

The third section discusses the main methodological innovations currently pro-

posed in the GPI research community to make this indicator more robust and

policy relevant, and to generate a standard methodology that enables cross-

country comparability. This article argues that it will be possible to measure the

GPI using a standard methodology once certain data issues have been resolved

and a consensus is reached on GPI 2.0. Politics nevertheless remains the main

obstacle to having an indicator like the GPI play a useful role in policy-making

for a sustainable future.

1. GDP and beyond

GDP was conceived in the context of the Great Depression, as economists sought

to understand and respond to mass unemployment (Coyle, 2014; Mazzucato,

2018). The architects of national accounts – Colin Clark in the United Kingdom

and Simon Kuznets in the United States – wanted a baseline indicator to as-

sess how well policy responses were working. Initially, Kuznets advocated for

a way of measuring welfare that did more than simply gauge market activity;

he wanted to leave out market activities that did not directly add to people’s

material welfare and to include non-market activities that enhanced welfare.

Ultimately, however, under the ascendant Keynesian approach, national income

was dened as the sum of market exchanges, specically the sum of value

added by production, and became a measure of value creation in the economy.

Kuznets’s call for an aggregate national welfare measure was not heeded until

Nordhaus and Tobin (1972) proposed the Measure of Economic Welfare, which

is discussed below.

Over time, GDP has become a powerful measure of economic and even na-

tional performance. It is routinely used to assess a country’s welfare, despite

warnings issued from the outset against such interpretations and those found in

United Nations System of National Accounts (SNA) documents (European Com-

mission et al., 2009). Critics have emphasized that GDP fails to account for a num-

ber of factors that either contribute to or detract from welfare: the distribution

of income among households; activities that do not involve monetary transac-

tions, such as unpaid household services, volunteer work and leisure; post-dis-

aster expenditure on clean-ups and rebuilding; the cost of commuting to work;

and health expenditures resulting from exposure to water or air pollution. They