Canberra professor Robert Costanza wants academics, economists and policymakers to stop using GDP as a measure of countries’ economic development, arguing that the metric promotes unsustainable growth.
Writing in the scientific journal Nature today, Australian National University’s public policy chair Costanza argued that the GDP metric was developed more than 70 years ago and measured market transactions at the expense of factors like health, pollution and inequality.
“If a business used GDP-style accounting, it would aim to maximuse gross revenue – even at the expense of profitability, efficiency, sustainability or flexibility,” Costanza and his collaborators wrote.
“That is hardly smart or sustainable – think Enron. Yet since the end of the Second World War, promoting GDP growth has remained the primary national policy goal in almost every country.”
The researchers argued that booming GDP growth tended to come with pollution, crime, environmental destruction and income inequality, highlighting growing rates of drug abuse, incarceration and mistrust, and poorer physical and mental health in the US, China and India.
GDP is a key economic indicator in Australia but there are metrics like the Westpac-Melbourne Institute Consumer Sentiment index and the more recently introduced NAB Wellbeing Index that track factors like anxiety and life satisfaction.
Costanza et al suggested policymakers develop and adopt alternative metrics like the Genuine Progress Indicator (GPI), which came to prominence in the 1990s and has been described as analogous to a company’s net profit, calculated by subtracting costs from GDP.
The following chart, from ANU Dr Ida Kubiszewski’s 2013 study of GDP and GDI in 17 countries, found that GDI growth stalled in the 1970s, diverging from GDP:
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