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In: Economics

what is Genuine Progres Index, and is it a better indicator than GDP/GNP when it comes...

what is Genuine Progres Index, and is it a better indicator than GDP/GNP when it comes to economic health.

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Expert Solution

Genuine Progress Index or GPI is a metric which measures economy of a country. It is considered an alterntive of GDP (Gross Domestic Product).

Features of GPI:

  1. It is a metric to measure economic position of a country,
  2. It is considered a replacement/ supplement of GDP.
  3. It takes into account environmntal and social factors along with productivity of a country to analyse its economic status.
  4. It includes costs of performing economic activities which negatively affects the country's environment and the society.
    • Cost of resource depletion
    • Cost of crime
    • Cost of ozone depletion
    • Cost of family breakdown
    • Cost of air, water and noise pollution
    • Loss of farmland
    • Loss of wetlands
  5. It focuses on providing accurate and comprehensive information about well-being and sustainable development of an economy.
  6. It was developed out of theories of green economics ( which sees economics as a part of ecosystem).

  GPI a better indicator than GDP/GNP when it comes to economic health. Reasons-

  • GDP is a measure of an economy based on the value of goods and services produced in the country,whereas, GPI is an replacement/ supplement of GDP which measures the economic position of a country based on factors considered by GDP metric and with added environmental and social factors effecting the economy.
  • GPI takes into account broader pespective to measure the well-being of a nation whereas GDP only considers nation's income.
  • GPI metrics helps to analyze whether the economic production and consumption of a country has a negative or positive effect on the heath of the nation and its economy. It measures the cost incurred in repairing pollution, poverty and other economic issues of a country and enables balanced GDP spending. But GDP only considers productivity of a country and ignores cost/loss of increasing that productivity.
  • GPI involves measurement of certain factors which does not have proper quantitative indication like resource depletion,crime,ozone depletion, pollution, poverty, eductation indicator,etc. and calculates the cost of their empact on economy. But GDP takes into account only factors with monetory value.
  • GPI is a more reliable measure of economic progress as it distinguishes between the overall "shift in 'value basis of a product' adding its ecological empact into equation'.
  • GPI = GDP- the environmental & social costs whereas GDP = Consumption + Government spending + Investment + Net export
  • GPI helps in linking local consumption patterns with global consequences. For example GPI measures cost of resource depletion in a country and resource depletion due to consumption in the country leads to global resource depletion as well.

  


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