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.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
M. Abramowitz (1979) ‘Economic growth and its discontents’ M Boskin (Eds) ‘Economics and Human Welfare.’ Academic Press New York
A. Atkinson (1970) ArticleTitle‘On the measurement of inequality’ Journal of Economic Theory. 2 244–263 Occurrence Handle10.1016/0022-0531(70)90039-6
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
Australian Bureau of Statistics: (1992). Unpaid Work and the Australian Economy: Occasional Paper, Catalogue No. 5240.0, Canberra, AGPS
Bishop R. (1993). Economic efficiency, sustainability, and biodiversity. Ambio.May: 69–73
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
H. Daly (1991) ‘Steady-State Economics’ EditionNumber2 Island Press Washington, DC
H. Daly (1996) ‘Beyond Growth: The Economics of Sustainable Development’ Beacon Press Boston
H. Daly J Cobb (1989) ‘For the Common Good’ Beacon Press Boston
H. Diefenbacher (1994) ‘The index of sustainable economic welfare in Germany’ C. Cobb J. Cobb (Eds) ‘The Green National Product.’ UPA New York.
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
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
I. Fisher (1906) ‘Nature of Capital and Income’ A. M. Kelly New York
S. George (1988) ‘A Fate Worse than Debt’ Grove New York
G. Guenno S. Tiezzi (1998) ‘An Index of Sustainable Economic Welfare for Italy. Working Paper 5/98’ Fondazione Eni Enrico Mattei Milan
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
K. Hamilton (1994) ArticleTitle‘Green adjustments to GDP’ Resources Policy. 20 158–168 Occurrence Handle10.1016/0301-4207(94)90048-5
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
R. Howarth R. Norgaard (1990) ArticleTitle‘Intergenerational resource rights, efficiency, and social optimality’ Land Economics. 66 1–11
T. Jackson S. Stymne (1996) ‘Sustainable Economic Welfare in Sweden: A Pilot Index 1950-1992’ Stockholm Environment Institute Stockholm
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
P. Lawn (1998) ArticleTitle‘In defence of the strong sustainability approach to national income accounting’ Environmental Taxation and Accounting. 3 29–47
P. Lawn (1999) ArticleTitle‘On Georgescu–Roegen’s contribution to ecological economics’ Ecological Economics. 29 5–8
P. Lawn (2000) ‘Toward Sustainable Development: An Ecological Economics Approach’ Lewis Publishers Boca Raton
P. Lawn (2000) ArticleTitle‘Ecological tax reform: Many know why but few know how’ Environment, Development, and Sustainability.’ 2 143–164
Lawn P. (2002). How Well do Resource Prices Serve as Indicators of Natural Resource Scarcity?, Flinders University Working Paper in Economics, 2002–2006
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
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
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
K. Maler (1991) ArticleTitle‘National accounts and environmental resources’ Environmental and Resource Economics.’ 1 1–15
M. Max-Neef (1995) ArticleTitle‘Economic growth and quality of life’ Ecological Economics.’ 15 115–118 Occurrence Handle10.1016/0921-8009(95)00064-X
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
E. Neumayer (1999) ArticleTitle‘The ISEW – Not an index of sustainable economic welfare’ Social Indicators Research. 48 77–101 Occurrence Handle10.1023/A:1006914023227
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
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
D. Pearce (1993) ‘Blueprint 3: Measuring Sustainable Development’ Earthscan London
Redefining Progress: (1995). Gross production vs genuine progress’, Excerpt from the Genuine Progress Indicator: Summary of Data and Methodology, San Francisco, Redefining Progress
Rosenberg K. and Oegema T. (1995). A Pilot ISEW for The Netherlands 1950–1992, Amsterdam Instituut Voor Milieu – En Systeemanalyse
Rymes T. (1992). Some Theoretical Problems in Accounting for Sustainable Consumption, Carleton Economic Papers, 92-02
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
United Nations Statistical Division: (1993). Integrated Environmental and Economic Accounting, Handbook of National Accounting, Series F, No.61, New York
*Readers should send their comments on this paper to: BhaskarNath@aol.com within 3 months of publication of this issue.
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
- genuine progress indicator
- index of sustainable economic welfare
- national income
- valuation methods