By Julio Godoy
BERLIN, Sep 23 2009 (IPS)

A new report on Measurement of Economic Performance and Social Progress presented earlier this month in Paris by Nobel prize winners Joseph Stiglitz and Amartya Sen is a late, and quite modest contribution to an old debate, many experts say.

Not many believe it can influence the discussions at the G20 in Pittsburgh Sep. 24 and 25.

Stiglitz and Sen prepared the report on the request of French President Nicolas Sarkozy, and were expected to produce, as Sarkozy put it, "a statistical revolution" on national and private enterprise accounts that would leave behind standard economics indicators in use, such as the gross domestic product (GDP).

But the report progresses little beyond other work under way over years to develop indicators such as environmental degradation, health, and social wellbeing.

"The elder among us economists are very amused," Christian Chavagneux, editor of the French economics monthly Alternative Economiques, told IPS. The first questioning of the value of GDP as indicator came in the 1970s, Chavagneux said. "Since then, the number of alternative indicators of human and economic well-being has gone from zero in the 1970s to some 30 today."

Prime among these, he said, is the human development index (HDI) used by the UN Development Programme since 1990. The report considers measures such as life expectancy, literacy and education besides the GDP. The HDI was developed by Amartya Sen along with the renowned Pakistani economist Mahbub ul-Haq.

In the 1980s, several economists and environmental activists noted that GDP did not take into account deterioration of the environment, such as air pollution caused by economic activities, especially industry and transport.

The GDP's failure to consider environmental degradation triggered research on valuation of nature and the environment, and to integrate this into a new indicator of economic activity and human wellbeing.

In 2007, the UN Environmental Programme, in cooperation with the European Commission and the German and British ministries for the environment, launched The Economics of Ecosystems and Biodiversity (TEEB) research programme, aimed at measuring the economic significance of the global loss of biological diversity.

TEEB studies "the global economic benefits of biodiversity, to highlight the growing cost of biodiversity loss and ecosystem degradation and to draw together expertise from the fields of science, economics and policy to enable practical actions." The study's preliminary findings were released in 2008, and a final report is due October 2010.

Pavan Sukhdev, an Indian economist who founded the national accounting project Green Indian State Trust, is director of TEEB. The world's economy, understood in the traditional sense, "is but a sub-set of the larger economy of the natural resources and ecosystem services that sustain us," Sukhdev tells IPS.

"In our interim report (of 2008) we looked at the extent of losses of Natural Capital taking place as a result of deforestation and degradation," he said. "This was estimated at between 2 trillion and 4.5 trillion dollars per year, every year – a staggering economic cost of taking nature for granted."

Sukhdev said TEEB's final report will provide a "toolkit for policy-makers, which will cover subsidies and incentives, environmental liability, new market infrastructure, national income accounting, cost-benefit analysis, cost- effectiveness analysis, and methods for implementing a Payment for Ecosystem Services (PES) and Access and Benefits Sharing (ABS)."

TEEB will also give private enterprises information on "how to quantify and disclose, mitigate or offset corporate impacts on ecosystems and biodiversity." And, TEEB will aim to provide citizens with "information on the value of ecosystems and biodiversity and examples of how to reduce their impact on wild nature and influence producers through their private purchasing decisions," Sukhdev said.

Another indicator complementary to GDP is the Index of Social Health, developed in the U.S. in 1987 by the social scientists Marc Miringoff and Marque-Louise Miringoff, professors at the Fordham University in New York.

The U.S. Index of Social Health, which is measured regularly, "is based on the premise that the familiar economic measures, such as GDP, the stock market indexes, balance of trade, the rate of inflation, and the like, do not provide us with a sufficient assessment of our strength, progress, and well-being as a nation and a people," Marque-Louise Miringoff, director of the Fordham institute for innovation in social policy, and who produces the index, told IPS.

"In order to widen and deepen our national dialogue, bring it closer to our daily concerns, and create more effective public policy, we need to carefully monitor the social aspects of our national life, and acknowledge that these also require our constant attention," she added.

To such developments, the Stiglitz-Sen report adds little. The main task of the report, which Sarkozy commissioned in February 2008, was to consider what additional information might be required for more relevant indicators of social progress, to assess the feasibility of alternative measurement tools, and to discuss how to present statistical information in an appropriate way.

Stiglitz and Sen, who worked together with other British, French, and U.S. economists, made ten recommendations to policy makers. But the recommendations do not appear as eminent as the authors are.

They call for greater emphasis on income and consumption rather than production, to achieve a more appropriate evaluation of material wellbeing. They also say that distribution of income, and not the average income per capita, deserves a more important role in such an evaluation.

They say that non-market activities, such as services provided by families in private households, must be taken into account to measure living standards. The authors repeat the old demand of finding an appropriate measure for nature and its depletion to be incorporated into national and private enterprise accounts.

Some French commentators say Sarkozy is only trying to project that his government is improving national wellbeing.

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