“What you measure is what you get,” said Nobel prize-winning economist Joseph Stiglitz. Soon Vermont may measure its economic well-being somewhat differently.
This week, the Vermont legislature sent a bill to Gov. Peter Shumlin that charges the University of Vermont’s Gund Institute for Ecological Economics with developing a new way of measuring the health of the state economy: it’s called the Vermont Genuine Progress Indicator.
The law would be the first of its kind in the U.S. and builds on a growing network of state GPI initiatives, most notably Maryland’s.
Since World War II, policy-makers and their economic advisers worldwide have measured economic progress by the Gross Domestic Product, or GDP, which tracks the volume of commercial transactions: the purchase and sale of stuff.
“And that’s what we’ve gotten — more stuff,” says Jon Erickson, professor and managing director of UVM’s Gund Institute. “But is having more stuff the only purpose of the economy? Is it even the main purpose?”
Erickson doesn’t think it is — or should be — anymore.
“GDP accounting grew out of the Great Depression and became the dominant planning tool for post-war expansion,” he says. “But today economists and policy-makers alike are questioning the utility of such a narrow metric of progress, looking for more comprehensive measures that reflect the environmental and social realities of our time.”
That’s why Erickson and colleagues have been working hard on behalf of the new legislation, S.237, “An Act Relating To The Genuine Progress Indicator,” — working closely with the governor’s office as well as testifying before the state legislature.
The law will call on the state government to work with the Gund Institute to “establish and test a genuine progress indicator” the legislation says, that “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.”
“It makes sense that Vermont, with its commitment to environmental protection and social justice, would be in the forefront of a movement to redefine progress,” says Erickson. “The GPI is a more accurate measure of the economy’s costs and benefits than GDP.”
What’s the economy for?
“The point of the economy isn’t to crank through resources as quickly as possible,” says Gund Fellow Eric Zencey who will be coordinating the GPI initiative. “The point is to build sustainable well-being for our communities.”
GPI studies and happiness surveys worldwide point to a growing disconnect between GDP and our standard of living.
“GDP assumes that if we’re all working 80 hours a week, farming our children out to daycare, and living high-consumption lifestyles, that’s a good thing for the economy,” says Erickson, “but that might not be such a good thing for our well-being.”
“GPI subtracts things that should be costs — but in GDP are counted as benefits — like air pollution, water pollution, land degradation,” says Erickson, “and it adds in things that GDP doesn’t count because they’re not part of the formal economy — like household work and volunteer time.”
“GDP goes up, but we aren’t better off, because GDP doesn’t deduct the costs or adjust for the distribution of all that economic activity,” Zencey says. “This new law calls for a better indicator set, one that will draw on social and environmental research to better guide Vermont economic policy.”
Zencey led a graduate class at the Gund Institute last fall that updated a 2003 Gund research project, the first state-level GPI study in the nation. The class drew on widely available data and networked with state legislators, agencies, and Vermont nonprofits to estimate twenty-six GPI variables that adjust Gross State Product (the state-level equivalent to GDP) for economic, social, and environmental costs and benefits to consumption.
The GPI bill was introduced into this year’s legislative session by state Sen. Anthony Pollina of Washington County, and several co-sponsors. “The GPI accounts for the quality of peoples’ lives, not just the commotion of money in the economy,” says Pollina. “We should strive for an economy that produces widely shared prosperity in a way that builds strong families, strengthens communities and protects the environment.”
The new bill directs the secretary of administration to work with the Gund Institute to review and formalize a Vermont GPI, with broad participation from state agencies, nonprofits and community organizations.
“We’re witnessing a shift toward measuring what matters,” says Tom Barefoot, co-coordinator of Gross National Happiness USA, a national group based in Vermont working on well-being indicators. “The partnerships being formed around the Vermont GPI bill are taking years of good thinking and putting it into action.”
Gross National Happiness USA is working with the Gund Institute, Common Good Vermont and Benchmarks for a Better Vermont to begin building a “Vermont data committee” called for in the GPI bill.
With passage of the bill, “Vermont continues to show that it’s a leader in progressive thinking and policy,” says Erickson, “We’re all a little prouder to be Vermonters this week.”
A conference, “Measuring What Matters,” to begin work on the Vermont GPI and well-being measures will be hosted by the Gund Institute, Gross National Happiness USA, and Common Good Vermont on Wednesday, May 30 at UVM. Find information and registration at http://www.gnhusa.org.
To learn more about past GPI studies led by the Gund Institute, including Vermont, Ohio and Maryland, see their featured projects at http://www.uvm.edu/giee/.
Download a one-page, PDF primer about the Vermont Genuine Progress Indicator, prepared by UVM’s Gund Institute: http://www.uvm.edu/~uvmpr/pdf/VTGPI-Primer.pdf