Capturing What the GDP Can’t

A country’s gross domestic product, or GDP, is often used as shorthand for its success – but, as Robert F. Kennedy pointed out four decades ago, it doesn’t capture the toll of our damaging practices or the benefits of hard-to-measure qualities like the ability of the public to have high-quality debates about important issues. If we only look at our GDP figures, short-sighted practices can seem like smart moves.

For instance, keeping gas taxes relatively low has allowed us to enjoy lots of cheap consumer goods, and our enthusiastic consumption of these goods has kept our GDP growing. At the same time, though, low gas taxes have encouraged unsustainable patterns of building and transportation, which imperil our wellbeing in the long run. It’s much harder to see these problems reflected in the GDP, because the consequences don’t occur immediately.

Paul Voosen of Greenwire reports that the European Union is finally taking steps to address this problem:

Yesterday, the European Union announced plans to launch an indicator this year to measure environmental stress. The index will reflect the pollution and environmental harm within the bloc’s member states, including aspects of climate change, biodiversity, air pollution, water use and waste generation.

GDP, which measures short-term spending, was not traditionally intended to measure well-being. And it is not a sufficient guide for modern policymaking that takes social and environmental objectives into account, said Stavros Dimas, the head of the environment directorate of the European Commission, the European Union’s executive arm.

“To change the world we need to change the way that we understand the world,” Dimas said while announcing the indicator. “And to do this we need to go beyond GDP.”

We often find ourselves arguing about the economic vs. environmental costs and benefits of particular activities (like coal mining, for instance). A Green GDP can make the tradeoffs more explicit and help steer us toward the choices that will be better for us in the long run.