Read the summary and the most important questions on Challenges & Solutions - Week 4 EFB MCM

• 1 Kubiszewski et al., 2013

• Nations need indictors that measure progress towards achieving what goals?

  Economic, social and envionrmental goals.

• What is GDP (gross domestic product) a great measure for? And what has it mistakenly been used for?

  To measure the economic aspect but it has been mistakenly used as a broader measure to measure welfare.

• Even though GDP was never designed to measure social or economic welfare, as what indicator is it most commonly used for today?

  A country's overall performance.

• What are the biggest problems with GDP? List the 3

  • Interprets every expense as positive and does not distinguish between welfare enhancing and welfare reducing activities.
    
  • Leaves out components that enhance welfare but do not involve monetary transactions.
  • Does not account for the distribution of income among individuals

• What is an alternative measure to the GDP? How many components does it hold?

  GPI (Genuine Process Indicator), it holds 24 different components.

• What does GPI measure?

  Measures of economic welfare generated by economic activity, in conjunction with other measures (environmental costs, crime, volunteering...).

• What is GPI not an indicator of?

  Sustainability

• How does GPI better approximate sustainable economic welfare?

  By separating activities that diminish welfare from those that enhance it.

• Should the measure of economic welfare be used alone?

  No, in conjunction with other measures.

• 1.1 Critiques of GPI

• What are the 5 critiques that have been taken up in the article for GPI?

  1. Uses inappropriate valuation methods to estimate some GPI items
     
  2. Assumes that human-made capital and natural capital are substitutes
  3. Includes some important welfare-related items but overlooks others, such as the benefits of political freedom
  4. Is subjective in its choice of components to include
  5. Lacks a solid theoretical basis.