An Assessment of the Valuation Methods Used to Calculate the Index of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI), and Sustainable Net Benefit Index (SNBI)

Abstract.

For some time now, ecological economists have been putting forward a ‘threshold hypothesis’ – the notion that when macroeconomic systems expand beyond a certain size, the additional cost of growth exceeds the flow of additional benefits. In order to support their belief, ecological economists have developed a number of similar indexes to measure and compare the benefits and costs of growth (e.g., the Index of Sustainable Economic Welfare and the Genuine Progress Indicator). In virtually every instance where an index of this type has been calculated for a particular country, the movement of the index appears to reinforce the existence of the threshold hypothesis. Of late, a number of observers have expressed concerns about whether these alternative indexes reflect concrete reality or the prejudices of ecological economists. In view of these concerns, this paper closely examines the valuation methods used in the calculation the Index of Sustainable Economic Welfare, the Genuine Progress Indicator, and the Sustainable Net Benefit Index. It is argued that a consistent and more robust set of valuation techniques is required in order for these alternative indexes to gain broad acceptability.

This is a preview of subscription content, access via your institution.

References

  1. M. Abramowitz (1979) ‘Economic growth and its discontents’ M Boskin (Eds) ‘Economics and Human Welfare.’ Academic Press New York

    Google Scholar 

  2. A. Atkinson (1970) ArticleTitle‘On the measurement of inequality’ Journal of Economic Theory. 2 244–263 Occurrence Handle10.1016/0022-0531(70)90039-6

    Article  Google Scholar 

  3. G. Atkinson (1995) ‘Measuring sustainable economic welfare: A critique of the UK ISEW, Working Paper GEC 95-08’ Centre for Social and Economic Research on the Global Environment Norwich and London

    Google Scholar 

  4. Australian Bureau of Statistics: (1992). Unpaid Work and the Australian Economy: Occasional Paper, Catalogue No. 5240.0, Canberra, AGPS

  5. Bishop R. (1993). Economic efficiency, sustainability, and biodiversity. Ambio.May: 69–73

  6. B. Castaneda (1999) ArticleTitle‘An index of sustainable economic welfare (ISEW) for Chile’ Ecological Economics. 28 231–244 Occurrence Handle10.1016/S0921-8009(98)00037-8

    Article  Google Scholar 

  7. H. Daly (1991) ‘Steady-State Economics’ EditionNumber2 Island Press Washington, DC

    Google Scholar 

  8. H. Daly (1996) ‘Beyond Growth: The Economics of Sustainable Development’ Beacon Press Boston

    Google Scholar 

  9. H. Daly J Cobb (1989) ‘For the Common Good’ Beacon Press Boston

    Google Scholar 

  10. H. Diefenbacher (1994) ‘The index of sustainable economic welfare in Germany’ C. Cobb J. Cobb (Eds) ‘The Green National Product.’ UPA New York.

    Google Scholar 

  11. R. Easterlin (1974) ‘Does economic growth improve the human lot?’ P. David R. Weber (Eds) ‘Nations and Households in Economic Growth.’ Academic Press New York

    Google Scholar 

  12. S. El Serafy (1989) ‘The proper calculation of income from depletable natural resources.’ Y. Ahmad S. El Serafy E. Lutz (Eds) ‘Environmental Accounting for Sustainable Development.’ World Bank Washington, DC

    Google Scholar 

  13. I. Fisher (1906) ‘Nature of Capital and Income’ A. M. Kelly New York

    Google Scholar 

  14. S. George (1988) ‘A Fate Worse than Debt’ Grove New York

    Google Scholar 

  15. G. Guenno S. Tiezzi (1998) ‘An Index of Sustainable Economic Welfare for Italy. Working Paper 5/98’ Fondazione Eni Enrico Mattei Milan

    Google Scholar 

  16. C. Hamilton (1999) ArticleTitle‘The genuine progress indicator: methodological developments and results from Australia’ Ecological Economics. 30 13–28 Occurrence Handle10.1016/S0921-8009(98)00099-8

    Article  Google Scholar 

  17. K. Hamilton (1994) ArticleTitle‘Green adjustments to GDP’ Resources Policy. 20 158–168 Occurrence Handle10.1016/0301-4207(94)90048-5

    Article  Google Scholar 

  18. K. Hamilton (1996) ArticleTitle‘Pollution and pollution abatement in the national accounts’ Review of Income and Wealth. 42 291–304 Occurrence Handle10.1111/j.1475-4991.1996.tb00143.x

    Article  Google Scholar 

  19. R. Howarth R. Norgaard (1990) ArticleTitle‘Intergenerational resource rights, efficiency, and social optimality’ Land Economics. 66 1–11

    Google Scholar 

  20. T. Jackson S. Stymne (1996) ‘Sustainable Economic Welfare in Sweden: A Pilot Index 1950-1992’ Stockholm Environment Institute Stockholm

    Google Scholar 

  21. T. Jackson F. Laing A. MacGillivray N. Marks J. Ralls S. Styme (1997) ‘An Index of Sustainable Economic Welfare for the UK, 1950–1996’ University of Surrey Centre for Environmental Strategy Guildford

    Google Scholar 

  22. P. Lawn (1998) ArticleTitle‘In defence of the strong sustainability approach to national income accounting’ Environmental Taxation and Accounting. 3 29–47

    Google Scholar 

  23. P. Lawn (1999) ArticleTitle‘On Georgescu–Roegen’s contribution to ecological economics’ Ecological Economics. 29 5–8

    Google Scholar 

  24. P. Lawn (2000) ‘Toward Sustainable Development: An Ecological Economics Approach’ Lewis Publishers Boca Raton

    Google Scholar 

  25. P. Lawn (2000) ArticleTitle‘Ecological tax reform: Many know why but few know how’ Environment, Development, and Sustainability.’ 2 143–164

    Google Scholar 

  26. Lawn P. (2002). How Well do Resource Prices Serve as Indicators of Natural Resource Scarcity?, Flinders University Working Paper in Economics, 2002–2006

  27. P. Lawn (2003) ArticleTitle‘A theoretical foundation to support the Index of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI), and other related measures’ Ecological Economics. 44 105–118 Occurrence Handle10.1016/S0921-8009(02)00258-6

    Article  Google Scholar 

  28. P. Lawn R. Sanders (1999) ArticleTitle‘Has Australia surpassed its optimal macroeconomic scale: finding out with the aid of ‘benefit’ and ‘cost’ accounts and a sustainable net benefit index’ Ecological Economics. 28 213–229 Occurrence Handle10.1016/S0921-8009(98)00049-4

    Article  Google Scholar 

  29. C. Leipert (1986) ‘From gross to adjusted national product’ P. Ekins (Eds) ‘The Living Economy: A New Economics in the Making.’ Routledge & Kegan Paul London

    Google Scholar 

  30. K. Maler (1991) ArticleTitle‘National accounts and environmental resources’ Environmental and Resource Economics.’ 1 1–15

    Google Scholar 

  31. M. Max-Neef (1995) ArticleTitle‘Economic growth and quality of life’ Ecological Economics.’ 15 115–118 Occurrence Handle10.1016/0921-8009(95)00064-X

    Article  Google Scholar 

  32. I. Moffat M. Wilson (1994) ArticleTitle‘An index of sustainable economic welfare for Scotland, 1980-1991’ International Journal of Sustainable Development and World Ecology. 1 264–291

    Google Scholar 

  33. E. Neumayer (1999) ArticleTitle‘The ISEW – Not an index of sustainable economic welfare’ Social Indicators Research. 48 77–101 Occurrence Handle10.1023/A:1006914023227

    Article  Google Scholar 

  34. E. Neumayer (2000) ArticleTitle‘On the methodology of the ISEW, GPI, and related measures: Some constructive suggestions and some doubt on the threshold hypothesis’ Ecological Economics. 34 347–361 Occurrence Handle10.1016/S0921-8009(00)00192-0

    Article  Google Scholar 

  35. R. Norgaard (1990) ArticleTitle‘Economic indicators of resource scarcity: a critical essay’ Journal of Environmental Economics and Management. 19 19–25 Occurrence Handle10.1016/0095-0696(90)90057-6

    Article  Google Scholar 

  36. D. Pearce (1993) ‘Blueprint 3: Measuring Sustainable Development’ Earthscan London

    Google Scholar 

  37. Redefining Progress: (1995). Gross production vs genuine progress’, Excerpt from the Genuine Progress Indicator: Summary of Data and Methodology, San Francisco, Redefining Progress

  38. Rosenberg K. and Oegema T. (1995). A Pilot ISEW for The Netherlands 1950–1992, Amsterdam Instituut Voor Milieu – En Systeemanalyse

  39. Rymes T. (1992). Some Theoretical Problems in Accounting for Sustainable Consumption, Carleton Economic Papers, 92-02

  40. E. Stockhammer H. Hochreiter B. Obermayr K. teiner (1997) ArticleTitle‘The index of sustainable economic welfare (ISEW) as an alternative to GDP in measuring economic welfare : The Result of the Austrian (revised) ISEW calculation 1955-1992’ Ecological Economics. 21 19–34 Occurrence Handle10.1016/S0921-8009(96)00088-2

    Article  Google Scholar 

  41. United Nations Statistical Division: (1993). Integrated Environmental and Economic Accounting, Handbook of National Accounting, Series F, No.61, New York

Download references

Author information

Affiliations

Authors

Corresponding author

Correspondence to Philip A. Lawn.

Additional information

*Readers should send their comments on this paper to: BhaskarNath@aol.com within 3 months of publication of this issue.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Lawn, P.A. An Assessment of the Valuation Methods Used to Calculate the Index of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI), and Sustainable Net Benefit Index (SNBI). Environ Dev Sustain 7, 185–208 (2005). https://doi.org/10.1007/s10668-005-7312-4

Download citation

Keywords

  • genuine progress indicator
  • index of sustainable economic welfare
  • national income
  • valuation methods