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Alternative Economic Indicators: Applicationand Potential Effects
Carlos Rymer Gregg MolHao ZhuangJoey NotaroKubilay Kavak  NTRES 431: Environmental StrategiesSpring, 2007
 
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Table of Contents
Introduction..................................................................................................... 3Application of Alternative Indicators............................................................. 51. The Genuine Progress Indicator in Alberta, Canada............................. 62. The Index of Sustainable Economic Welfare........................................ 83. The Human Development Index.......................................................... 11Discussion..................................................................................................... 15Conclusion.................................................................................................... 17References..................................................................................................... 19Appendix....................................................................................................... 20
 
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Introduction
Gross Domestic Product (GDP) is currently the international standard measure of a nation’seconomic status. GDP represents the monetary value of all the finished goods and services producedwithin a country's borders in a specific time period (usually on an annual basis). It includes all privateand public consumption of materials, government outlays, investments and exports that occur within adefined territory. The typical approach used to measure GDP is the expenditure method, which isdefined as follows: GDP =consumption + investment + (government spending) + (exports-imports)Since the 20
th
century, the world has pursued increased well-being and a greater quality of lifethrough economic growth as measured by GDP. Recently, there has been considerable debate aboutGDP as a measure of economic growth because its inclusion of parts of the economy is limited andinappropriate. The GDP has many serious problems, such as the flaws in calculating cross-border trading, exclusion of the black market, exclusion of unpaid social and ecosystem services, andinclusion of work that produces no net benefit or that results from repairing harm. It is becomingincreasingly clear that GDP is not a very good measure of economic growth that is inclusive of allaspects of society, including natural and social capital.Simon Kuznets, designer of the GDP and the international system of National Accounts, said inhis first report to the U.S. Congress in 1934 that “the welfare of a nation can scarcely be inferred froma measure of national income.” In order to ensure appropriate economic growth that maintains higheconomic, environmental, and social performance, the economy must be measured in terms of quantityand quality, especially in relation to environmental and social considerations. Growth should specifyimprovement for each of these considerations in relation to raising the quality of life, something thatdoes not simply equate with greater access to material consumption. According to Robert F. Kennedy,well-known environmental lawyer, “the gross national product includes air pollution and advertisingfor cigarettes and ambulances to clear our highways of carnage. GNP includes the destruction of the
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