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Category Archives: Genuine Progress

John Talberth in front of US Capitol Building

GPI 2.0: States and Cities Can Lead the Way Beyond GDP

John Talberth in front of US Capitol BuildingIn a new study authored by Dr. John Talberth and Michael Weisdorf of Portland State University, CSE has demonstrated a new methodology for the Genuine Progress Indicator (GPI) that promises to accelerate its adoption by states and cities as a way to measure and promote economic wellbeing that takes into account income inequality, environmental degradation, and the benefits of public investments in human, social, built and natural capital. For over three decades, the GPI has been one of the most ubiquitously used alternatives to GDP, but persistent issues with its theoretical foundations, methods, and sources of data have kept its use in check.

At the 2017 US Society for Ecological Economics annual conference in St. Paul MN, Dr. Talberth and Mr. Weisdorf presented their new paper entitled GPI 2.0: Pilot Accounts for the United States, Maryland, and Baltimore. The paper was published in the journal Ecological Economics just prior to the conference. While many of the GPI 2.0 upgrades are difficult to understand without formal training in welfare economics, the end result is a new method that greatly enhances its usefulness to states and cities committed to sustainable development and growing their economies in ways that matter most to the wellbeing of their citizens.

Minnesota could very well be the next state to enroll the GPI towards this end. During the 2017 Legislative Assembly, Senator John Marty (DFL) and Representative Jennifer Schultz (DFL) teamed up to introduce legislation establishing the GPI as a metric maintained by University of Minnesota’s Bureau of Business and Economic Research (BBER). The bill would finance BBER’s calculation of the GPI and also require that the Minnesota Department of Management and Budget include the GPI along side other measures of state economic growth and wellbeing in its annual forecasts.

Momentum is growing to pass a revised version of this bill next year and have Minnesota join the ranks of Maryland, Vermont, Washington and Hawai’i as states exploring the GPI’s use as a litmus test for economic policy and performance. One of the GPI’s advantages over GDP is that it provides a way to accurately report the true benefits and costs of public investments in health care, education and the environment and other policies to advance the goals of sustainable development. GDP cannot do this because it is simply a gross measure of economic activity that says nothing about how that activity translates into household wellbeing. To operationalize this use of the GPI, a “GPI impact note” can be used in place of more conventional fiscal and economic impact notes prepared for proposed legislation. In 2014, CSE demonstrated the usefulness of the GPI note concept by applying it the proposal to lift Maryland’s minimum wages. The analysis documented that raising Maryland’s minimum wage to over $10/hour would generate net benefits in the range of $1.7 billion per year, chiefly as a result of increased spending by low to middle income households and reduced costs of inequality.

State and cities that adopt the GPI as a key economic metric will discover that it is a powerful tool for depoliticizing economic policy interventions and shifting the debate over such policies onto rational grounds in terms of metrics that matter rather than partisan rhetoric that serves no purpose other than to generate attention grabbing headlines. Now that a GPI 2.0 methodology is in place, CSE is eager to help Minnesota and other states move forward with this agenda.

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Baltimore-GPI

Baltimore’s Genuine Progress Indicator Shows Healthy Economic Growth

Baltimore-GPIIn the first city-level analysis of its kind in Maryland, the Center for Sustainable Economy (CSE) found Baltimore’s economy well on the way to economic recovery taking into account social and environmental costs as well as the benefits associated with consumer spending, infrastructure and unpaid labor. The analysis utilized the first iteration of the Genuine Progress Indicator (GPI) for Baltimore, a metric adopted by Governor O’Malley in 2010 at the State level to measure economic performance in a more comprehensive manner than conventional approaches. Using the GPI, CSE found that between 2012 and 2013, economic wellbeing of Baltimore’s households grew by nearly 5% – a rate much higher than the growth in gross domestic product (GDP) per capita, which hovered around 1.5% during the same period for the Baltimore-Towson metropolitan area.

According to Dr. John Talberth, lead author of the study, “Baltimore’s economy is heading in the right direction by bolstering the economic wellbeing of households while reducing environmental and social costs. The City’s innovative policies on climate, stormwater, and living wages are helping to reduce the resource intensity of economic activity while improving livelihoods. This is reflected in the GPI’s robust growth rate.”

As an example, the GPI tracks the costs of depleting nonrenewable energy resources including oil, coal and gas by calculating what it will take to replace them with renewable energy substitutes. Because the share of renewable energy consumption increased and the amount of fossil energy consumed by vehicles and power plants dropped the costs of this line item decreased by 5.47% between 2012 and 2013. On the benefits side, the GPI’s increase was based in part on the benefits of leisure time, which rose from $4,182 per capita in 2012 to $4,668 in 2013, an increase of over 11.5%. “As the economy recovers, people can afford to drop that second job and enjoy time with friends and family,” Talberth continued.

While the GPI’s growth was encouraging, the report also identified places where Baltimore needs to improve. The costs of commuting rose by over 14.5% as more vehicles clogged the roads. There were also big jumps in the costs of crime, underemployment, solid waste pollution, and what are known as “defensive and rehabilitative” expenditures. These are items – like medical care and household security systems – that reflect underlying problems like worsening health and less neighborhood safety and as such, reflect spending that households would like to reduce in the future.

CSE will be using the Baltimore GPI to demonstrate how the metric can be used at the county and city level throughout Maryland to inform policy decisions and monitor economic performance.

For our report and related materials, please click here to visit the project page.

Closing the Inequality Divide in Maryland

Genuine Progress BlogBy: Daphne Wysham and John Talberth.

Most Americans didn’t see it coming.

Back at the end of 2004, our nation’s leading economic indicator, the Gross Domestic Product, was soaring along at a robust rate of over 4 percent per year. The prospects for continued prosperity, the GDP figures suggested, seemed comfortably high. In fact, that apparent prosperity did not continue long. Within four years, our U.S. economy would collapse into the Great Recession and the “Great Stagnation” that followed.

Analysts have devoted considerable attention to many of the factors that fed that sudden, Continue reading

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