Substitutes to GDP

Genuine Progress Indicator

• A genuine progress indicator (GPI) is a metric used
to measure the economic growth of a country.
• The GPI indicator takes everything the GDP uses
into account, but adds other figures that represent
the cost of the negative effects related to economic
activity (such as the cost of crime, cost of ozone
depletion and cost of resource depletion, among
others).
• The GPI nets the positive and negative results of
economic growth to examine whether or not it has
benefited people overall.
• Genuine Progress Indicator is an attempt to
measure whether the environmental impact and
social costs of economic production and
consumption in a country are negative or
positive factors in overall health and well-being

• GDP doesn’t take into account negative

externalities of growth. Higher GDP may lead to a
large rise in pollution, crime and congestion
leaving people with lower economic welfare and
lower levels of happiness. Therefore, GDP can be
misleading as an account of economic welfare.
• GDP increases twice when pollution is created – once upon
creation (as a side-effect of some valuable process) and
again when the pollution is cleaned up. By contrast, GPI
counts the initial pollution as a loss rather than a gain,
generally equal to the amount it will cost to clean up later
plus the cost of any negative impact the pollution will have
in the mean time. 
• The relationship between GDP and GPI mimics the
relationship between the gross profit and net profit of a
company. The net profit is the gross profit minus the costs
incurred, while the GPI is the GDP (value of all goods and
services produced) minus the environmental and social
costs.
• By focusing on a wider measure of economic
indicators, it encourages policymakers to think
in broader terms of economic welfare and not
just crude GDP statistics.
• GDP only measures output – not how it actually
effects people’s living standards and how it is
used in society.
• GPI encourages long-term planning. i.e.
sustainable growth rather than short-term
measures which increase GDP at expense of
damaging the environment.
Human Development Index
• The Human Development Index (HDI) is a composite
statistic (composite index) of life
expectancy, education, and per capita
income indicators, which are used to rank countries
into four tiers of human development.
• A country scores higher HDI when the lifespan is
higher, the education level is higher, and the GDP per
capita is higher.
• The index is based on the human development
approach, developed by Ul Haq, often framed in
terms of whether people are able to "be" and
"do" desirable things in life. Examples include—
Beings: well fed, sheltered, healthy; Doings: work,
education, voting, participating in community life.
• The HDI was created to emphasize that people and
their capabilities should be the ultimate criteria for
assessing the development of a country, not
economic growth alone.
• The HDI can also be used to question national policy
choices, asking how two countries with the same
level of National per capita Income can end up with
different human development outcomes.
• The Human Development Index (HDI) is a summary
measure of average achievement in key dimensions
of human development: a long and healthy life, being
knowledgeable and have a decent standard of living.
The HDI is the geometric mean of normalized indices
for each of the three dimensions.
• The health dimension is assessed by life expectancy at
birth, the education dimension is measured by mean
of years of schooling for adults aged 25 years and
more and expected years of schooling for children of
school entering age. The standard of living dimension
is measured by gross national income per capita.
• The HDI uses the logarithm of income, to reflect the
diminishing importance of income with increasing
Gross National Income(GNI). The scores for the three
HDI dimension indices are then aggregated into a
composite index using geometric mean.
• In contrast, the GDP per capita only accounts for the
gross domestic product without paying any attention
to other factors of an economy
• Every year UNDP ranks countries based on the
HDI report released in their annual report. HDI is
one of the best tools to keep track of the level of
development of a country, as it combines all
major social and economical indicators that are
responsible for economic development.
• The HDI give an overall index of economic
development. It has some limitations and
excludes several factors that might have been
included, but it does give a rough ability to make
comparisons on issues of economic welfare –
much more than what just using GDP statistics
show.
Gross National Happiness
• Gross National Happiness or GNH is
a philosophy that guides the government
of Bhutan. It is an index which is used to
measure the collective happiness and well-
being of a population. 
• In 2011, The UN General Assembly passed
Resolution "Happiness: towards a holistic
approach to development" urging member
nations to follow the example of Bhutan and
measure happiness and well-being and calling
happiness a "fundamental human goal."
• GNH is distinguishable from GDP by valuing
collective happiness as the goal of
governance, by emphasizing harmony with
nature and traditional values as expressed in
the 9 domains of happiness and 4 pillars of
GNH.
• Each domain is composed
of subjective (survey-based) and objective
indicators. The domains weigh equally but the
indicators within each domain differ by
weight.
• A GNH Policy Screening Tool and a GNH Project
Screening Tool can be used by the GNH
commission to determine whether to pass
policies or implement projects.
• GNH Index was developed by the Centre for
Bhutan Studies with the help of the researchers
from Oxford University to help measure the
progress of Bhutanese society.
• The indicators and domains of GNH aim to
emphasize different aspects of wellbeing, and
different ways of meeting underlying human
needs.
• The GNH generates three types of results;
headcount, intensity and the overall GNH index.
Headcount refers to the percentage of people who
are happy, while intensity is the average number of
domains in which not-yet-happy people are happy.
• The Index, the headcount, and intensity are all
‘decomposable’, meaning they can be broken
down by population group.
• People are considered happy when they have
sufficiency in 66% of the (weighted) indicators or
more – that is, when they were identified as
extensively happy or deeply happy.