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In addition, GPI considers whether a country's economic activity over a year has left the country with a better or worse future possibility of repeating at least the same level of economic activity in the following years. For example, agricultural activity that uses replenishing water resources, such as river runoff, will score a higher GPI than the same level of agricultural activity that drastically lowers the water table by pumping irrigation water from wells.
Most economists assess the progress in welfare of the people in a country over time by comparing the gross domestic product over time, that is by adding up the annual dollar value of all the goods and services produced within the country over successive years. However, under the standard application of GDP, ecological disasters such as the Exxon Valdez oil spill improve the GDP, because the calculation of GDP adds as a bonus economic activity the lump sum of labor and capital expenditures required to mitigate the ecological damage to Prince William Sound. [1]
In contrast, other economists, notably Herman Daly, John Cobb, [2] and Philip Lawn [3] have asserted that a country's growth, increased goods production, and expanding services have both "costs" and "benefits"--not just the "benefits" that contribute to GDP. That is, these and similar economists concerned over sustainability of current economic activity assert that, in some situations, expanded production facilities and other free market activities damage the health, culture, and welfare of people in ways that conservative free market economists ignore. In particular, Daly, Cobb, and Lawn assert the "threshold hypothesis" that Manfred Max-Neef developed--the notion that when macroeconomic systems expand beyond a certain size, the additional benefits of growth are exceeded by the attendant costs. (Max-Neef 1995.)
Accordingly for example, Philip Lawn has developed a theoretical framework for determining the "costs" of economic activity that balance against the "benefits" of growth in a Genuine Progress Indicator to determine whether economic development improves or harms the welfare of people. According to Lawn's model, the "costs" of economic activity include the potential harmful effects of the following costs:
Hicks (1946) pointed out that the practical purpose of calculating income is to indicate the maximum amount people can produce and consume without undermining their capacity to produce and consume the same amount in the future. From a national income perspective, it is necessary to answer the following question: ‘‘Can a nation’s entire GDP be consumed without undermining its ability to produce and consume the same GDP in the future?’’
Fisher (1906) contended that "economic welfare depends on the psychic enjoyment of life," not just the production of goods.
Despite the efforts of local communities to achieve more sustainable development, Canada lacks a federal Genuine Progress Indicator (GPI), said Green Party of Canada leader Jim Harris. “Measuring well being through GPI is the first step to forming solid solutions to problems facing our communities,” said Harris. “Indicators such as Gross Domestic Product (GDP) show financial growth without taking into account harmful activities such as crime and pollution. A strategy that uses GPI to better reflect our concerns is essential to protecting our health and overall well being.” [4]