Editing Genuine progress indicator (section)

==Theoretical foundation==
The need for a GPI to supplement indicators such as GDP was highlighted by analyses of [[uneconomic growth]] in the 1980s, notably that of [[Marilyn Waring]], who studied biases in the [[United Nations System of National Accounts|UN System of National Accounts]].{{Citation needed|date=June 2017}}

By the early 1990s, there was a consensus in [[human development theory]] and [[ecological economics]] that growth in [[money supply]] was actually reflective of a loss of well-being: that shortfalls in essential natural and social services were being paid for in cash and that this was expanding the economy but degrading life.{{Citation needed|date=January 2015}}

The matter remains controversial and is a main issue between advocates of [[green economics]] and [[neoclassical economics]]. Neoclassical economists understand the limitations of GDP for measuring human well-being but nevertheless regard GDP as an important, though imperfect, measure of economic output and would be wary of too close an identification of GDP growth with aggregate human welfare. However, GDP tends to be reported as synonymous with economic progress by journalists and politicians, and the GPI seeks to correct this shorthand by providing a more encompassing measure.

Some economists, notably [[Herman Daly]], [[John B. Cobb]]<ref name=cobbdaly>{{cite web|url=http://www.scottlondon.com/reviews/daly.html|title=For the Common Good by Herman Daly and John Cobb Jr. – A Book Review by Scott London|work=scottlondon.com}}</ref> and [[Philip Lawn]],<ref name=lawn>{{cite web|url=http://www.iisd.org/measure/compendium/DisplayInitiative.aspx?id=1367|title=Initiative Details|work=iisd.org}}</ref> have asserted that a country's growth, increased goods production, and expanding services have both costs and benefits, not just the benefits that contribute to GDP. They assert that, in some situations, expanded production facilities damage the health, culture, and welfare of people. Growth that was in excess of sustainable norms (e.g., of [[ecological yield]]) had to be considered to be uneconomic. According to the "threshold hypothesis", developed by [[Manfred Max-Neef]], "when macroeconomic systems expand beyond a certain size, the additional benefits of growth are exceeded by the attendant costs" (Max-Neef, 1995). This hypothesis is borne out in data comparing GDP/capita with GPI/capita from 17 countries. The graph demonstrates that, while GDP does increase overall well-being to a point, beyond $7,000 GDP/capita the increase in GPI is reduced or remains stagnant.<ref>{{cite journal|last1=Kubiszewski|first1=Ida|last2=Costanza|first2=Robert|last3=Franco|first3=Carol|last4=Lawn|first4=Philip|last5=Talberth|first5=John|last6=Jackson|first6=Tim|last7=Aymler|first7=Camille|journal= Ecological Economics|date=30 April 2013|volume=93 |pages=57–68 |title=Beyond GDP: Measuring and achieving global genuine progress |doi=10.1016/j.ecolecon.2013.04.019|bibcode=2013EcoEc..93...57K |s2cid=17390700 |url=http://www.bioline.org.br/pdf?nd13075}}</ref> Similar trends can be seen when comparing GDP to life satisfaction as well as in a [[Gallup (company)|Gallup Poll]] published in 2008.<ref>{{cite web|last1=Deaton|first1=Angus|title=Ph.D.|url=http://www.gallup.com/poll/104608/worldwide-residents-richer-nations-more-satisfied.aspx|website=Gallup|date=27 February 2008|access-date=10 December 2014}}</ref>

According to Lawn's model, the "costs" of economic activity include the following potential harmful effects:<ref>{{cite journal |last=Lawn |first=Philip A. |year=2003 |title=A theoretical foundation to support the Index of Sustainable Economic Welfare (ISEW), Genuine Progress Indicator (GPI), and other related indexes |journal=Ecological Economics |volume=44 |issue=1 |pages=105–118 |doi=10.1016/S0921-8009(02)00258-6 |bibcode=2003EcoEc..44..105L }}</ref>

*Cost of resource depletion
*Cost of [[crime]]
*Cost of [[ozone depletion]]
*Cost of [[family breakdown]]
*Cost of [[air pollution|air]], [[water pollution|water]], and [[noise pollution]]
*Loss of [[arable land|farmland]]
*Loss of [[wetland]]s

Analysis by [[Robert Costanza]] also around 1995 of [[ecosystem services|nature's services]] and their value showed that a great deal of degradation of nature's ability to clear waste, prevent erosion, pollinate crops, etc., was being done in the name of monetary profit opportunity: this was adding to GDP but causing a great deal of long term risk in the form of mudslides, reduced yields, lost species, water pollution, etc. Such effects have been very marked in areas that suffered serious [[deforestation]], notably [[Haiti]], [[Indonesia]], and some coastal [[mangrove]] regions of [[India]] and [[South America]]. Some of the worst land abuses for instance have been [[shrimp farm]]ing operations that destroyed mangroves, evicted families, left coastal lands salted and useless for agriculture, but generated a significant cash profit for those who were able to control the export market in shrimp. This has become a signal example to those who contest the idea that GDP growth is necessarily desirable.

GPI systems generally try to take account of these problems by incorporating [[sustainability]]: whether a country's economic activity over a year has left the country with a better or worse future possibility of repeating at least the same level of economic activity in the long run. For example, agricultural activity that uses replenishing water resources, such as river runoff, would score a higher GPI than the same level of agricultural activity that drastically lowers the water table by pumping irrigation water from wells.

===Income vs. capital depletion===

[[John Hicks|Hicks]] (1946) pointed out that the practical purpose of calculating income is to indicate the maximum amount that people can produce and consume without undermining their capacity to produce and consume the same amount in the future. From a national income perspective, it is necessary to answer the following question: "Can a nation's entire GDP be consumed without undermining its ability to produce and consume the same GDP in the future?" This question is largely ignored in contemporary economics but fits under the idea of [[Sustainability#Economic sustainability|sustainability]].