{"id":791,"date":"2008-10-16T07:24:01","date_gmt":"2008-10-16T12:24:01","guid":{"rendered":"http:\/\/ietransfer.wpengine.com\/?p=791"},"modified":"2016-09-16T09:50:48","modified_gmt":"2016-09-16T16:50:48","slug":"gdp-vs-gpi-which-measures-the-economy-best","status":"publish","type":"post","link":"https:\/\/inspiredeconomist.com\/articles\/gdp-vs-gpi-which-measures-the-economy-best\/","title":{"rendered":"GDP vs GPI : Which Measures The Economy Best?"},"content":{"rendered":"

With a New Economy starting to emerge, how should we measure its strength? Using the old fashioned Gross Domestic Product<\/a>, or the more holistic Genuine Progress Indicator<\/a>? In other words, GPD vs GPI.<\/h3>\n

 <\/p>\n

\"GPI<\/a><\/p>\n

Stop me if you\u2019ve heard this one before:<\/p>\n

A businessman is showing a potential investor around his factory. The investor is very impressed and likes the businessman\u2019s figures. These show that the factory produces $5.2m worth of goods.<\/p>\n

\u201cAnd what about your expenditure?\u201d he asks the businessman. The businessman looks back at him blankly. \u201cYou know: raw materials; transport costs; staff wages; loan repayments…..\u201d<\/p>\n

The business man starts to dribble from the corner of his mouth. In the end the investor storms off muttering darkly about how the gene pool needs to be reduced.<\/p>\n

This is precisely how GDP \u2013 Gross Domestic Product \u2013 works. It measures what is produced, but ignores what is required to create that production. So long as the factory keeps churning stuff out to be flogged to consumers, nothing else matters.<\/p>\n

GPI — An Alternative to GDP<\/h3>\n

In 1995 Redefining Progress<\/a> introduced a new way of measuring economic strength: the Genuine Progress Indicator (GPI).<\/p>\n

This looks at economic activity from the point of view of the impact it has on the individual and society, not the impact it has on a bank balance.<\/p>\n

The biggest difference between it and GDP is what they class as costs and what they class as benefits. For instance:<\/p>\n