Measuring sustainability and growth

Measuring sustainability and economic growth isn’t easy. As we’ve discussed, metrics like GDP have many problems, though they also appear to capture some important elements of economic growth. Metrics like HDI do a better job of measuring growth. Similarly, GPI arguably does a better job of measuring sustainability, though it doesn’t measure aspects of education and health which HDI captures. What concepts would you want to incorporate in a sustainability measure?

Part of the challenge is deciding what to measure, and part of the challenge is figuring out how to measure it. Arrow et al. define a metric called “comprehensive wealth”, which they show captures aspects of both well-being (economic growth) and sustainability. To actually operationalize it, they have to make some judgement calls. For example, education and health proxy for quantities of human capital, with rates of return on education and VSL approximating the prices. Forest extent, land use, and known oil reserves proxy for quantities of natural capital, with market prices capturing the associated value. Pollution measures are used to reflect changes in quantities of environmental capital, with the social cost of carbon reflecting the price of that pollution. What observable variables would you use to operationalize your concepts? How would you ensure the units are commensurable?

The main question to answer

How would you construct a sustainability index or set of sustainability indices?

Some questions to help guide your discussion

  1. What criteria would you want to measure, and how?
  2. How would you weight those criteria?
  3. How would you weight the future vs the present?
  4. What do your measurements and weightings imply about the things you value or think society ought to value?
  5. What does the way you handle present and future imply?
  6. What scales does your measure apply to? (E.g., is it meant to be global? Apply to countries or states? Colleges and companies? Students in a class?)
  7. What are the units of your measure? Do the units make sense?