Keywords: GPI, Genuine Progress Indicator, Hicksian income, Fisherian income, sustainability indicators, economic growth, national accounting, sustainable development, causal relationships, modelling, substitutability, consumption
Towards genuine progress on the Genuine Progress Indicator
The construction of the Genuine Progress Indicator (GPI) is viewed through the lens of economic methodology. The criterion of 'consistency with a definition (of income)' as a basis for providing microfoundations for the GPI is contrasted with that of being derived explicitly from a formal model, with the deficiencies of the former highlighted. The importance of formal modelling and, through it, establishing causal relationships is vital to the extent that the GPI is used to draw inferences about thresholds (and more generally about the benefits vs. costs of economic growth) – which is to say, the GPI is used as a signalling device, rather than simply as a tracking device. Issues of substitutability between types of capital, thermodynamic constraints and the importance of prices are also addressed. In particular, the importance of substitutability in consumption, as opposed to simply in production, is emphasised.