The Vermont Genuine Progress Indicator

Eric Zencey Fellow and Coordinator, Vermont Genuine

Progress Indicator Project

You can’t make something from nothing and you can’t make nothing from something.

Laws of Thermodynamics

2. You can’t recycle energy.

Laws of Thermodynamics

The Entropy Law and the Economic Process, Harvard University Press, 1971

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“Seen solely from a thermodynamic perspective, an economy consists of nothing more

than a set of institutions that transform valuable, low-entropy inputs into valueless waste.”

Implication

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Implication: Measure what matters: Sustainable delivered wellbeing

GDP Fails horribly

• Assumes “more stuff” = happiness & wellbeing• Assumes growth in transactions = more stuff• Neglects elements of wellbeing that aren’t bought

or sold (health, social engagement, strong families & neighborhoods, good governance, etc.)

• Miscounts costs as benefits (like storm damage)• Doesn’t count unpaid work• Doesn’t count ecosystem services

GDP Fails horribly

• AND the emphasis on maximizing matter—and-energy throughput means it isn’t sustainable AT ALL….

A sustainable system or entity does not undercut its own preconditions for existence.

Premise:

Humans in society enjoy the benefit of services of four stocks of capital:

built natural social cultural.

• No society can be sustainable if its operation depends on the draw-down of built, natural, social, or cultural capital.

From which it follows

Sustainable wellbeing requires the preservation of these four forms of capital

Economic + Environmental + Social

• Personal Consumption• Income Inequality• Adj. Personal Consumption• Services of Consumer

Durables• Cost of Consumer Durables• Cost of Underemployment• Net Capital Investment

• Cost of Water Pollution• Cost of Air Pollution• Cost of Noise Pollution• Cost of Net Wetland

Change• Cost of Net Farmland

Change• Cost of Net Forest Cover

Change• Cost of Long-term

Environmental Damage• Cost of Ozone Depletion• Cost of Non-Renewable

Energy Resource Depletion

• Value of Household Work• Cost of Family Changes• Cost of Crime• Cost of Personal Pollution

Abatement• Value of Volunteer Work• Cost of Lost Leisure Time• Value of Higher Education• Services of Highways and

Streets• Cost of Commuting• Cost of Motor Vehicle

Crashes

GPI =

Per Capita GSP v. GPI

Per Capita GSP v. GPI

GPI

GPI Economic

GPI Social

GPI Environmental

Per Capita GSP less Government Expenditures less Business Investment

PersonalConsumption

Personal Consumption adjusted for Income Distribution

Less the Cost of Consumer Durables

Plus the Services of Consumer Durables

Less the Cost of Underemployment

Plus Net Capital Investment

Per Capita GSP vs. GPI Economic Factors

Less the Cost of Water, Air, and Noise Pollution

Less the Cost of Climate Change, Ozone Depletion, and Nonrenewable Resource Depletion

Less the Net Change of Wetlands, Forestlands, and Farmlands

Per Capita GSP vs. GPI Economic + Environmental Factors

Less the Cost of Family Changes, Crime, and Personal Pollution Abatement

Less the Cost Commuting and Motor Vehicle Accidents

Less the Cost of Lost Leisure Time

Plus the Value of Household Work and Volunteer Work

Plus the Value of Higher Education and Services of Highways & Streets

Per Capita GSP vs. GPI Economic + Environmental + Social Factors

Per Capita GSP vs. GPI

Vermont Act 113

An act relating to the genuine progress indicator

(a) Purpose. The purpose of the genuine progress indicator (“GPI”) is to measure the state of

Vermont’s economic, environmental, and societal well-being as a supplement to the

measurement derived from the gross state product and other existing statistical

measurements.

(b) Definition. The GPI is an estimate of the net contributions of economic activity to the well-

being and long-term prosperity of our state’s citizens, calculated through adjustments to

gross state product that account for positive and negative economic, environmental, and

social attributes of economic development.

(c) Intent. It is the intent of the general assembly that once established and tested, the GPI

will assist state government in decision-making by providing an additional basis for

budgetary decisions, including outcomes-based budgeting; by measuring progress in the

application of policy and programs; and by serving as a tool to identify public policy

priorities, including other measures such as human rights.

Further Developments • GPI forms the structure of the Comprehensive Economic

Development strategy being developed by the state (which will be announced shortly).

• The budgeting committees of the state legislature have begun integrating GPI measures into their work, through development of GPI related performance goals and through exploring the adoption of “GPI notes” on bills that are introduced

• The state auditor has announced his intention to start auditing state programs against criteria developed from GPI

• A prominent socially responsible business has begun talks with the Gund about integrating GPI into their criteria for performance evaluation.

Further Information

www.vtgpi.org

• Current and previous reports of VT GPI• Technical report on methodology• Other GPI related news

Further Information

Also, consider attending

“Happiness and Wellbeing: Building a National Movement”

the fifth North American Conference on Gross National Happiness, in Burlington, VT, May 29 and 30. For details see

http://www.gnh2014.com/

The Vermont Genuine Progress Indicator