Improving the genuine progress indicator to measure comparable net welfare: U.S. and California, 1995–2017

This paper argues that important improvements in the Genuine Progress Indicator (GPI) can be made by directly calculating the loss of natural resources, the benefits of leisure, and adjusting for inequality using a global norm, rather than using local, historical benchmarks. Local benchmarking is an obstacle to the standardisation and comparability of the GPI. We provide alternative methods for the five components that have used benchmarking in the standard GPI. We present empirical estimates for the GPI of the United States and California over the period 1995 through 2017, calculated with and without the alternative methods. Using our alternative methods, we show that some differences between the GPI of CA and the U.S. are artefacts of the benchmark methods. Implementing the alternative methods narrows the gap between the CA and the U.S. GPI as it reduces the U.S. environmental costs, and removes the artificial differential between CA and the U.S. in the cost of inequality. However, we find that the GPI provides insight into net welfare not reflected in GDP, both with and without the benchmarking methods. Overall, we suggest that the GPI can be significantly improved with these high priority revisions without changing the fundamental approach or theoretical framework.