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It is widely recognised that GDP as conventionally measured does not reflect an economy’s impact on the environment and its consumption of natural resources. There have been various attempts to develop broader measures of economic performance via adjustments to conventional GDP (some of which also address non-environmental limitations of conventional GDP), for example:

  1. Measure of Economic Welfare (Nordhaus & Tobin 1972)
  2. “True NNP inclusive of natural resource stock diminution” (Hartwick 1990)
  3. Gross Sustainable Development Product (GSDP) (Global Community Assessment Centre)
  4. Genuine Progress Indicator (GPI) (eg Anielski 2001)
  5. Green GDP (a term whose precise content appears to be disputed (see eg Boyd 2006))

Is this just a proliferation of alternative measures, or is it possible to discern progress or convergence towards a best or most useful measure that adjusts GDP for environmental and resource impacts, or perhaps different best measures for different purposes?

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  • $\begingroup$ Man, I bet all the major economies (in GDP sense) would be currently in terrible recession if we measured them in an "Environmental GDP" instead. The problem is that it's hard to impossible to give numbers for environmental damage, as the problem is too broad. $\endgroup$
    – Bregalad
    Apr 10, 2015 at 14:16
  • $\begingroup$ Short reply - I'll try to answer more fully later: A good place to start is a report by the U.S. National Academy of Science called "Nature's Numbers": nap.edu/catalog/6374/… . The upshot: There is a consensus among economists that it is possible to refine standard measures of GDP rigorously to incorporate adjustments for impacts on environment and natural resources. Implementation is difficult due to data problems. Most alternative indicies, e.g. GPI, are not consistent with national income accounting principles. $\endgroup$
    – Arthur Small
    Jul 17, 2016 at 16:00

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A good place to start is a report by the U.S. National Academy of Science called Nature's Numbers. The upshot: There is a consensus among economists that it is possible to refine standard measures of GDP rigorously to incorporate adjustments for impacts on environment and natural resources. Implementation is in practice difficult due to data problems.

Most alternative indicies, e.g. GPI, are not consistent with national income accounting principles. But since there is a demand for such indicies, there is a supply response.

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