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The green national product is an economic metric that seeks to include environmental features such as
environmental degradation Environmental degradation is the deterioration of the environment (biophysical), environment through depletion of resources such as quality of air, water and soil; the destruction of ecosystems; habitat destruction; the extinction of wildlife; an ...
and
resource depletion Resource depletion is the consumption of a resource faster than it can be replenished. Natural resources are commonly divided between renewable resources and non-renewable resources (see also mineral resource classification). Use of either ...
with a country's
national product National Product is a little-known rock band from Oahu, Hawaii. History National Product began playing local gigs while attending Kalaheo High School, and moved to California in 2000.Melissa MonizCover Story: Hot Rock from the Islands ''MidWeek' ...
.


Criticism of gross national product

The
gross national product The gross national income (GNI), previously known as gross national product (GNP), is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP), plus factor incomes earned by foreign ...
(GNP) measures the
welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...
of a nation's economy through the aggregate of products and services produced in that nation. Although GNP is a proficient measurement of the magnitude of the economy, many economists, environmentalists and citizens have been arguing the validity of the GNP in respect to measuring
welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...
.
Joseph Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American New Keynesian economist, a public policy analyst, and a full professor at Columbia University. He is a recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the Joh ...
, Nobel Prize–winning economist, states that this standard measurement for any national economy has become deficient as a measure of long-term economic health in the recently resource-driven and globalizing world. Critics suggest that GNP often includes the environment on the wrong side of the balance sheet because if someone first pollutes and then another person cleans the pollution, both activities add to GNP making environmental degradation frequently look good for the economy. Critics of
mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also known as orthodox economics, it can be contrasted to h ...
complain that GNP compiles spending that makes us worse off, spending that allows us to stay in the same place, and spending that makes us better off all in a single measure, giving a nation no clue if they are making progress or not.Cobb Clifford, and Cobb, John. "The Green National Product",
University Press of America University Press of America is an academic publisher based in the United States. Part of the independent Rowman & Littlefield Rowman & Littlefield Publishing Group is an independent publishing house founded in 1949. Under several imprints, the ...
, c1994. p.2 "Introduction"
Manfred Max-Neef Artur Manfred Max Neef (; 26 October 1932 – 8 August 2019) was a Chilean economist of German descent. Max-Neef was born in Valparaíso, Chile. He started his career as a professor of economics at the University of California, Berkeley in the ea ...
, Chilean economist, explains that politicians feel that it is irrelevant whether the spending is productive, unproductive, or destructive. In this sense, it is common to see political policies that call to depredate a natural resource in order to increase the GNP. To take into account the environmental depredation and resource depletion, there is a call to shift away from the traditional GNP and construct an assessment of national product that takes into account environmental effects.


History


Measure of economic welfare

Ever since the Industrial Revolution, scientists and economists have warned of an
inflection point In differential calculus and differential geometry, an inflection point, point of inflection, flex, or inflection (British English: inflexion) is a point on a smooth plane curve at which the curvature changes sign. In particular, in the case of ...
for the United States economy where expansion is inevitably limited by the steadily decreasing availability of natural resources. In 1973,
William D. Nordhaus William Dawbney Nordhaus (born May 31, 1941) is an American economist, a Sterling Professor of Economics at Yale University, best known for his work in economic modeling and climate change, and one of the 2 recipients of the 2018 Nobel Memoria ...
and
James Tobin James Tobin (March 5, 1918 – March 11, 2002) was an American economist who served on the Council of Economic Advisers and consulted with the Board of Governors of the Federal Reserve System, and taught at Harvard and Yale Universities. He devel ...
,
Yale Yale University is a private research university in New Haven, Connecticut. Established in 1701 as the Collegiate School, it is the third-oldest institution of higher education in the United States and among the most prestigious in the wor ...
economists, were the first to question the GNP in "Is growth obsolete?". Nordhaus and Tobin developed a
Measure of Economic Welfare The Index of Sustainable Economic Welfare (ISEW) is an economic indicator intended to replace the gross domestic product (GDP), which is the main macroeconomic indicator of System of National Accounts (SNA). Rather than simply adding together al ...
(MEW) and stated that welfare must be sustainable, in the sense that nations that devour their stock of capital are not as "well" as the national income would suggest.


Index of sustainable economic welfare

However, in "The Green National Product", Clifford Cobb and John Cobb argue that the Measure of Economic Welfare failed to encompass the depletion of
natural capital Natural capital is the world's stock of natural resources, which includes geology, soils, air, water and all living organisms. Some natural capital assets provide people with free goods and services, often called ecosystem services. All of t ...
. In 1989,
Herman Daly Herman Edward Daly (July 21, 1938 – October 28, 2022) was an American ecological and Georgist economist and professor at the School of Public Policy of University of Maryland, College Park in the United States, best known for his time as a s ...
, John Cobb, and Clifford Cobb created what is known as the
Index of Sustainable Economic Welfare The Index of Sustainable Economic Welfare (ISEW) is an economic indicator intended to replace the gross domestic product (GDP), which is the main macroeconomic indicator of System of National Accounts (SNA). Rather than simply adding together all ...
(ISEW). This new measurement of welfare was created in the hopes that it would replace the flawed GNP. Herman Daly stated that the key flaw of the traditional GNP was that it ignored core accounting principles of business where all revenues and expenses are allocated to income. ISEW called for ecological and economic sustainability to coincide since the economy is ultimately dependent on the natural resources that the earth provides.Cobb Clifford, and Cobb, John. "The Green National Product", University Press of America, c1994. p.280 "Bridging Economics and Ecology" Rather than the original GNP, ISEW takes into account costs that are naturally unsustainable. By creating ISEW, they wanted to expand the current national product so that individuals, businesses, and governments could take actions that will generally enhance welfare, rather than merely enhancing the traditional GNP.


Genuine progress indicator

In 1995, Redefining Progress created the genuine progress indicator (GPI) as an alternative to the traditional GNP. This new measurement of national income would allow policymakers to gauge how well citizens are, economically and socially. Unlike welfare adjustments in the past like MEW and ISEW, GPI adjusts not only for environmental depredation, but also for income distribution, housework, volunteering, crime, changes in leisure time, and life-span of consumer durables and public infrastructure. This was one of the first alternatives to the traditional GNP to be used by the scientific community and governmental organizations globally.


In the United States

In 1992, the
Bureau of Economic Analysis The Bureau of Economic Analysis (BEA) of the United States Department of Commerce is a U.S. government agency that provides official economy of the United States, macroeconomic and industry statistics, most notably reports about the gross domestic ...
(BEA) of the
U.S. Department of Commerce The United States Department of Commerce is an United States federal executive departments, executive department of the Federal government of the United States, U.S. federal government concerned with creating the conditions for economic growth ...
initiated intensive work to create an environmental accounting system. The BEA began by creating satellite accounts with easily measurable commodities such as petroleum and coal. The first BEA publication was the U.S. Integrated Environmental and Economic Satellite Accounts (IEESA) in 1994. The initial results were quite significant, and showed how GNP was overestimating the impact of mining industries in respect to the nations economic wealth. Mining companies didn't care for the initial publications, for obvious reasons, and soon
Alan Mollohan Alan Bowlby Mollohan (born May 14, 1943) is an American politician who served as the U.S. representative for from 1983 to 2011. He was a member of the Democratic Party and the Blue Dog Coalition. The district encompasses the northern part of ...
, a Democratic House Representative from
West Virginia West Virginia is a state in the Appalachian, Mid-Atlantic and Southeastern regions of the United States.The Census Bureau and the Association of American Geographers classify West Virginia as part of the Southern United States while the Bur ...
's coal country, sponsored an amendment to the 1995
Appropriation Bill An appropriation, also known as supply bill or spending bill, is a proposed law that authorizes the expenditure of government funds. It is a bill that sets money aside for specific spending. In some democracies, approval of the legislature is ne ...
. In response, Congress directed the BEA to suspend further work in
environmental accounting Environmental accounting is a subset of accounting proper, its target being to incorporate both economic and environmental information. It can be conducted at the corporate level or at the level of a national economy through the System of Integrated ...
, and to obtain an external review on their findings.


Need

Many people are calling for a green national product that would indicate if activities benefit or harm the economy and well-being. This green national product would revolve around the social and economic issues on which many green movements have focused: care for the earth and all that sustain it. This new national product would differ from the traditional GNP by addressing both the sustainability and well-being of the planet and its inhabitants. It is essential that this system takes into account natural capital, which is currently hidden from our traditional measurement.


See also

*
Bhutan GNH Index Gross National Happiness (GNH), sometimes called Gross Domestic Happiness (GDH), is a philosophy that guides the government of Bhutan. It includes an index which is used to measure the collective happiness and well-being of a population. Gross Nat ...
* Genuine progress indicator *
Green gross domestic product The green gross domestic product (green GDP or GGDP) is an index of economic growth with the environmental consequences of that growth factored into a country's conventional GDP. Green GDP monetizes the loss of biodiversity, and accounts for costs ...
*
Gross National Happiness Gross National Happiness (GNH), sometimes called Gross Domestic Happiness (GDH), is a philosophy that guides the government of Bhutan. It includes an index which is used to measure the collective happiness and well-being of a population. Gross Nat ...
*
Happiness economics The economics of happiness or happiness economics is the theoretical, qualitative and quantitative study of happiness and quality of life, including positive and negative affects, well-being, life satisfaction and related concepts – typically t ...
*
Index of Sustainable Economic Welfare The Index of Sustainable Economic Welfare (ISEW) is an economic indicator intended to replace the gross domestic product (GDP), which is the main macroeconomic indicator of System of National Accounts (SNA). Rather than simply adding together all ...


References

{{reflist, 2 Economic data Gross domestic product Economics of sustainability Sustainable development Environmental indices