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MISMEASURING OUR LIVES. GDP – Gross Domestic Product HDI – Human Development Index. The Right Question. What do we really care about? HUMAN WELLBEING So what do we want to measure and track? HUMAN WELLBEING. Score Card -GDP. - PowerPoint PPT Presentation

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MISMEASURING OUR LIVES

GDP – Gross Domestic Product

HDI – Human Development Index

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The Right Question

What do we really care about?

HUMAN WELLBEING

So what do we want to measure and track?

HUMAN WELLBEING

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Score Card -GDP

• Measures only economic production and therefore only material wealth constituent of wellbeing

• No social and environmental dimensions

• Sustainability- Snap shot in time

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Interlinkages and Human Well-Being-JSSA.

(Tanaka, 2005)

Level of local nature

Level of local nature

Level of

physi

cal unhealt

hin

ess

Level of

menta

l u

nh

ealt

hin

ess

Physical

Mental

Source: JSSA 2011

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Score Card -HDI

• Measures health and education in addition to income as constituents of well-being

• No environmental dimension

• Sustainability- Snap shot in time

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WE MANAGE WHAT WE MEASURE

KEY PRINCIPLESVALUESSUSTAINABILITYEQUALITYTRADE-OFFS AND SYNERGIES

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THE PROPOSITION: INCLUSIVE WEALTH

Point 1: Wellbeing is defined as the discounted flow of present and future generation’s consumption flow.

Point 2: The discounted flow is dependent on the capital asset [Productive Base] base of the economy

Point 3: Wellbeing increases as long as the CHANGE in the VALUE of the capital asset base is positive

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IWI: The Coupled System

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The Capital Asset Base

• Social Capital

• Natural Capital

• Human Capital

• Produced Capital

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INCLUSIVE WEALTH

Value of Assets = Inclusive Wealth

Inclusive Wealth is the SHADOW PRICE of the asset multiplied by the QUANTITY STOCK of asset

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Trade-Offs and Synergies

• Substitution between capital assets

• Critical Capital Stocks

• Inter-dependency among Capitals

• Shadow Prices– Rate of Substitution – Externalities

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Natural Capital

• Non-Renewable Resources – Oil, Minerals

• Renewable Resources– Ecosystem Services

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Ecosystem Services

• Provisioning

• Regulating

• Cultural

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Shadow Prices

Strength and Achilles Heel

How do we compute shadow prices?

Coupled Systems Modeling

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IWI

IWI per capita

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Average annual growth in IWI per capita

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Average annual growth in IWI per capita

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Average annual growth in IWI per capita

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Average annual growth in IWI per capita

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AVERAGE ANNUAL GROWTH RATES DISAGGREGATED BY NATURAL CAPITAL

TYPES

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ANNUAL GROWTH RATES DISAGGREGATED BY NATURAL CAPITAL

TYPES Agricultural Land

Forest Resources

Minerals

Fisheries

Fossil Fuels Natural Capital Index 

Agricultural Land

Forest Resources

Minerals

Fisheries

Fossil Fuels Natural Capital Index 

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KEY DATA SOURCES

RESOURCE DATA SOURCE

Agricultural Land Food and Agricultural Organization (FAO)

Fisheries Sea Around Us Project database (SAUP)

Forest Resources Food and Agricultural Organization (FAO)

Fossil FuelsUnited States Energy Information Administration (EIA)

Minerals United States Geological Survey (USGS)

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Key Findings

• Focus on both the aggregate sum of all capitals and each capital

• Population growth rate is key for measuring productive base of country

• Shadow prices are key to measuring wellbeing and progress.

• National accounts need to be revised to reflect all four capitals

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Key Messages

• New Yardstick for measuring progress is needed

• Wellbeing is multi-dimensional and dependent on the productive base of the economy

• Need shadow prices of key ecosystem services