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Adjusting GDP for ecological deficit: the Index of Debt to the Future (IDF)

Author

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  • Theodore P. Lianos

    (Athens University of Economics and Business)

  • Anastasia Pseiridis

    (Panteion University)

Abstract

Many criticisms have been raised against the use of GDP as a measure of economic welfare. Although these criticisms may be justified, GDP arguably seems to remain the best measure of economic activity and could not be easily abandoned. It could, however, be adjusted for the ecological deficit that the production of goods and services creates. The Index of Debt to the Future (IDF) proposed in this paper adjusts the measured GDP by subtracting the part of GDP that creates the ecological deficit as estimated by the difference between biocapacity and ecological footprint. That part of GDP is a measure of the debt of the present generation to the future generations. The adjusted GDP, defined as the difference between GDP and the implied debt, is the net economic magnitude which the present generation should consider as its own. In addition to its simplicity, the proposed Index of Debt to the Future has the advantage of being easy to calculate with minimal marginal cost and easy to communicate to a wider audience. Graphic abstract

Suggested Citation

  • Theodore P. Lianos & Anastasia Pseiridis, 2021. "Adjusting GDP for ecological deficit: the Index of Debt to the Future (IDF)," SN Business & Economics, Springer, vol. 1(3), pages 1-22, March.
    • Handle: RePEc:spr:snbeco:v:1:y:2021:i:3:d:10.1007_s43546-021-00041-0
    DOI: 10.1007/s43546-021-00041-0
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    More about this item

    Keywords

    Sustainable welfare; Ecological footprint; GDP; ISEW; GPI; SDG12;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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