Lesson 6
Measuring Economic Success


"Students should learn about the statistics that have been developed to measure the functioning of our economy, including measures of national income (such as the gross national product) . . . "

California State History/Social Science Framework


Students should understand statistics such as the Gross Domestic Product (formerly the Gross National Product) that have been developed to measure the functioning of our economy and be aware that they do not always accurately indicate the health and sustainability of society in general.


Many people listen to GDP reports and assume that they are an accurate indicator of the health of our economy and therefore our society as a whole. This lesson questions the assumption that economic success in terms of high GDP necessarily reflects a healthy economy. It also asks students to decide for themselves what constitutes a healthy society and to come up with their own ideas for economic indicators. Finally, it provides reading and information on new economic indicators that are being developed with the goal of sustainability and quality of life in mind.


What helps the GDP?examines specific examples of how the GDP can decline when more sustainable practices are adopted and how it can increase when environmental accidents and other negative events occur.


This activity asks students to develop their own ideas for alternative indicators. It also introduces them to some that have already been developed: The Genuine Progress Indicator (GPI).


Gross Domestic Product is a measure of all goods and services sold within a country in one year. It measures the quantity of things a society produces, but it does not tell us much about the quality of life individuals are experiencing. For over thirty years, Dr. Roefie Hueting in the Bureau of Statistics in the Netherlands has been trying to convince governments and other economists that they need to include damage to the environment as a cost, not a benefit, to the GDP. Dr. Hueting's "green GDP," reports the New York Times (Dec. 9, 1990), is now drawing interest all over Europe. Even in the United States the US Congress has asked its Department of Commerce to work on a new system of calculating environmental costs and benefits.

Ecologist Harold Gilliam, a writer for the San Francisco Chronicle, posed the same question as long ago as 1979. As he noted in his column, "American farmers in the Grain Belt deliver vast quantities of wheat and corn, raising the GDP; but for every ton of grain produced, six tons of priceless topsoil are lost to erosion by wind and water, a cost not measured by the GDP." Gilliam calls for a NET national product; GDP minus the cost of depleting resources - soil, goundwater, forest cover, plant and animal species, air and water quality etc.

Hazel Henderson, a futurist and thinker on economic sustainability, calls using the GDP as a measure of economic success analogous to flying an airplane by looking only at the oil pressure gage. She suggests that rather than reporting just the GDP on the news, we have a three minute "national report card" where facts and figures are given on a whole range of economic, environmental and social issues.

Studying GDP gives us an opportunity to become aware that a constantly growing GDP may not produce a better quality of life. It also helps focus on the problem of continued growth itself.

Economist Richard Fletcher of the Inter-American Development Bank told a 1990 Society for International Development Conference that he too questions the ability of continued growth to improve the quality of life for most of the people of the world.

"....for four decades (we acted on the belief) that we would improve the quality of life by producing more material wealth, more goods, more services. Yet thousands and millions of people suffer from hunger ­ suffer death from hunger and diseases that are preventable, given the quantitative resources that we have at our disposal."

Fletcher also observes a " new problem, one that we didn't even consider forty years ago, a phenomena where growth is producing effects that are bad. Growth itself is producing damage ­ environmental damage, loss of species, pollution, psychological and social stress. This gives rise to a new concern, the concern of sustainability ­ can growth be sustainable? Will growth in itself produce negatives that make it important to stop growth?"

If 'money isn't everything', what is?

GDP is particularly ineffective for measuring the health of developing economies. This is because the distribution of wealth is so uneven, and in many cases the profits made in industry do not touch the lives of many citizens who may not even be in the money economy.

A new measure of progress and perhaps new values underlying the new measures may be necessary in the new global economy.


If we measure our progress by the quantity of things produced and sold every year, what does that say about what we value; what we call progress?

How might our way of measuring economic success discourage, for example, innovations in energy conservation, recycling, and sustainable uses of forests?


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