Gross Domestic Product (GDP) is the market value of all final goods and services produced within a country in a given time period, usually one year. It is usually correlated with the standard of living, which in fact is not true in its entirety. GDP is the basic measure of a country's overall economic output.
GDP can be determined in three ways. They are the product (or output) approach, the income approach, and the expenditure approach. The 'product approach' sums the outputs of every class of enterprise to arrive at the total. It is used to calculate the market value of goods and services produced in the country. The 'income approach' method measures GDP by adding incomes that firms pay households for the factors of production they hire- wages for labor, interest for capital, rent for land and profit for entrepreneurship. The last approach to GDP is the 'expenditure approach', which calculates GDP by summing the four possible types of expenditures as follows1:
GDP = Consumption + Investment + Government Expenditure + Net exports 2
GDP (Y) is the sum of Consumption (C), Investment (I), Government Spending (G) and Net Exports (X - M). This is represented in the equation below:
GDP (Y) = C + I + G + (X - M)
Gross Domestic Product still is a widely used index and it the value of everything a country has produced in a period of one year. It is also often used to compare the economic activity of two countries. The change in the gross domestic product is often used to describe the development of a country. GDP is used for the same reason other indicators are used:
However, when the environmental issues are contemplated, GDP does not fulfill the aims of an index, as it does not inform the decision-makers of the environmental impact that the GDP has had.
According to the website Carbon FootprintTM a carbon footprint is a measure of the impact our activities have on the environment, and in particular climate change. It measures the amount of greenhouse gases produced in people's everyday lives concerning, for example, burning fossil fuels for electricity, heating, and transportation. It is also stated in the website that carbon footprint consists of two parts: primary and secondary. The primary footprint is further explained to be a measure of our direct emissions of CO2, that we can control. These include, for example, domestic energy consumption and transportation. The secondary footprint is stated to be the measure of our indirect emissions from the whole life-cycle of the products we use. Thus, these include all the emissions caused by the manufacturing of the products, and also the waist that they create when breaking down. All in all, the more we buy, the more emissions we cause.3
The measurement of carbon footprint is not simple. Wedmann and Minx state that most articles deal with the question of how much carbon dioxide emissions can be allocated to a certain product, company or organization, although none of them provides an unambiguous definition of the term carbon footprint. However, the term is most usually used as a synonym for emissions of carbon dioxide or green house gases expressed in CO2 equivalents.4
At the moment people in the world consume so much that we have already exceeded the Earth's ecological potential. In other words, we consume faster that the planet is able to regenerate its resources. Ruzevicius argues that "the growing pressure of ecosystems creates disintegration and distinction of natural habitats, threatens the biological diversity and well-being of humanity"; and the economic and social development in a country should be oriented such way that it doesn't harm the opportunity to satisfy the needs of future generations.
In his article Ruzevicius states that ecological footprint is an indicator that reflects national and global sustainable development. The concept was first created by Mathis Wackernagel and William Rees in 1990. It exists to indicate the effects inhabitants have on their environment and natural resources in a region or a country, i.e. "how much biologically available earth and water resources are consumed and how much of our waste do they absorb". Ruzevicius states that the concept of Ecological Footprint also includes the product's life-cycle analysis. According to him this analysis quantifies product's impact on the environment through its life, including, for example, the energy and material associated with materials extraction, manufacturing, assembly, distribution, use, disposal, and the resulting emissions. For that reason, the carbon footprint discussed above is a part of ecological footprint.
Ecological Footprint is calculated and reported yearly by an international organization called Global Footprint Network. The size of the ecological footprint is determined as follows: "quantity of arable land together with land used for agriculture needed per person or for a group of people in the city who use energy, food, water, transport, waste disposal as well as for people living in buildings with many other needs." The article of Ruzevicius highlights, though, that even though the Ecological Footprint is a good indicator to reflect national and global sustainable development, it is only an environmental protection index since "it doesn't integrate social and economical indicators that are important while estimating the sustainable development of the country, region or city.
The Green GDP is an indicator which was created in China in 2004 by Wen Jiabao, premier of China. It replaced the GDP between 2004 and 2006. Its aim is to calculate the GDP of China in taking into account the negative externalities on the environment caused by the economy5. Hence, the calculation of the Green GDP is as follows: GDP - Resource and environmental costs.6
The advantages:
The drawbacks:
All in all, this new indicator can easily give some useful information on environmental destruction. It also punishes the countries which pollute too much. However, there are still the problem of accounting and the fact that no one would use it because of the bad results it gives. That is why, to be efficient, all the system of values must change to suppress this idea of competition.
The Human Development Index (HDI) has been created in 1990 by the economist Amartya Sen, in order to give information that are not taken into account in the GDP. Every year, it is calculated by the Program of the United Nations for the development, for 175 countries.7
The HDI is the aggregation of three elements: the GDP per capita, the life expectancy and the level of education. Those three components have the same weight in the calculation in order to reduce the inequalities between all the different countries.8
Nevertheless, its main drawback is that if one of the component decreases, the increase of another one can balance the loss. Yet, the components are not substitutable. Besides, the HDI is evaluated between 0 and 1, as its elements, so that let to developed countries a very little margin of progress.9. Furthermore, this indicator does not take into account any environmental aspects.
The Happy Planet Index shows "the ecological efficiency with which human well-being is delivered around the world".10
It is composed of three parts11:
Therefore it is a pragmatic indicator, providing information about the way countries manage to achieve sustainability in the whole process of their activities, focusing on the input and the output. The input is represented by the resources from the environment and the output by the human welfare.12
However, there are some limits:
The 4th King of Bhutan, HM Jigme Singye Wangchuck, promulgated GNH since the beginning of his reign in 1972. The fact that he said GDP needed to be channeled towards happiness in 1970s and 1980s was quite new. Since then, GNH has attracted attention, and opinion around the world has started to converge on happiness as a collective goal.13
The GNH indicators have been designed to include nine core dimensions that are regarded as components of happiness and well-being in Bhutan, and are constructed of indicators which are robust and informative with respect to each of the dimensions. These nine indicators are14:
In a first step, there is a comparison between the different districts surveyed, to see which districts have higher GNH scores. After that, GNH is analyzed across time to see if GNH is decreasing or increasing after we conduct future surveys.
The next step is to decompose the GNH by dimension (or indicator), by district, by gender, by occupation, by age group etc., in order to see how shortfalls in GNH vary across disaggregated levels. This information reveals immediately in what dimensions of life shortfalls from sufficiency are most acute. Only once the GNH is decomposed, tracking this decomposition across time is the best way to see in which dimensions sufficiency is increasing or decreasing.
The last step is to study the average severity of deprivations, to identify whether the gap below the sufficiency cutoff is deepening or narrowing across time.15
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