Measuring Regional Finnish Welfare by Genuine Progress Indicator Applications

Transcription

1 Measuring Regional Finnish Welfare by Genuine Progress Indicator Applications ENCORE Groningen 21 Sep 2012 Dr. Jukka Hoffrén Head of Research, Docent Statistics Finland, Statistical R&D unit

2 GDP as the proxy of societal welfare GDP of National Accounts is a sum of all values of products and services produced by a specific nation. I.e. all commodities produced that have market price can be included to GDP. In Economics it is supposed that all production increases consumption and that increases in consumption inevidently increase happiness. Thus economic growth (growth of GDP) is desired societal goal that creates welfare.

3 GDP critics Originally GDP was designed during WWII for the needs of war time mobilisation of nation s resources and the concequent post-war reconstruction. GDP does not take into account homework, distribution of income, deterioration of capital, negative environmental hazards caused by production, degradation of nature and depletion of natural resources etc. Thus GDP has been regarded as misleading indicator of wellbeing in modern day western societies and thus GDP should be replaced by more advanced monitoring system.

4 Wellbeing in post-industrialised societies GDP monitor economic progress from production perspective. Direct linkage to welfare is missing. Does economic growth benefit people? Consequently we should monitor more closely the actual welfare received by the people. Increasing the welfare of individuals is today the main political goal of western post-industrial societies. Only by taking into account distribution of income and all nonmarket production we can effectively increase the level of welfare that we desire. Thus environmental hazards should have price tag so that they can be taken into account in decision-making and the total welfare of a society can be maximised.

5 Beyond GDP Since 1990 s complementary welfare indicators have been designed to account for the actual welfare received by the people. In 2007, the European Commission, European Parliament, Club of Rome, OECD and WWF hosted the high-level conference Beyond GDP. The objectives were to clarify which indices are most appropriate to measure progress, and how these can best be integrated into the decision-making process and taken up by public debate. In August 2009, the European Commission released its policy paper GDP and beyond: Measuring progress in a changing world which is available in 22 languages. The paper mould the ideas presented at the conference into a roadmap for action.

6 Development of new indicators in the EU EU: The EU Beyond GDP initiative is about developing indicators that are as clear and appealing as GDP, but more inclusive of environmental and social aspects of progress, More about the initiative: Eurostat, Beyond GDP Sponsorhip Group; short and medium term targets: completion of GDP with social and environmental aspects, see: UK: Subjective Well-being Annual Population Survey (APS) were published 24 July 2012, see: France: Quality of life, sustainable development, See:

7 RIO +20 summit, June We recognize the need for broader measures of progress to complement GDP in order to better inform policy decisions, and in this regard, we request the UN Statistical Commission in consultation with relevant UN System entities and other relevant organizations to launch a programme of work in this area building on existing initiatives. As a time limit for new accounting system year 2014 has been proposed. Source: The Future We Want:

8 Commission on the Measurement of Economic Performance and Social Progress proposals Beside GDP measuring economic performance social progress requires also considering: 1. Economic welfare: household focus, measures that are complementary to SNA. Ideal measure includes household market consumtion, public services, non-market activities, value of leisure and defensive expenditures. 2. Non-economic aspects: capabilities and quality of life. Time use accounts? 3. Sustainability; global and national sustainability constraints must be taken into account. Adjusted Net Savings (ANS) must be positive.

9 Stiglitz commission measures for Finland (per capita, real prices, year 2000)

10 ISEW and GPI for Finland Index of Sustainable Economic Welfare (ISEW) and Genuine Progress Indicator (GPI) have many benefits as they are based on private consumption expenditures that are corrected by positive and negative factors. GPI have been proposed to pan european use. See, Timeseries for years have been calculated at Statistics Finland, R&D unit during since ISEW is based on J. Cobb s and H. Daly s ideas. Finnish GPI Calculation is based on the calculation of US GPI for years by Redefining Progress organisation.

11 GPI formula GPI = A + B - C - D +/- I A is income weighted private consumption B is value of non-market services generating welfare C is private defensive cost of natural detoriaration D is cost of deteoriation of nature and natural resources I is increase in capital and balance of international trade

12 Development of GDP, ISEW and GPI indicators in Finland in (per capita in real prices)

13 Contents of ISEW and GPI Index of Sustainable Economic Welfare (ISEW) Genuine Progress Indicator (GPI) + Personal consumption weighted by income distribution index + Personal consumption weighted by income distribution index + Value of household work + Value of household work and parenting + Services of consumer durables + Value of higher education + Services of streets and highways + Value of volunteer work + Public expenditure on health and education + Services of consumer durables - Cost of consumer durables + Services of highways and streets - Private expenditure on health and education - Cost of crime - Advertising expenditure - Loss of leisure time - Costs of commuting - Cost of unemployment - Cost of urbanisation - Cost of consumer durables - Cost of automobile accidents - Cost of commuting - Cost of water pollution - Cost of household pollution abatement - Cost of air pollution - Cost of automobile accidents - Cost of noise pollution - Cost of water pollution - Loss of wetlands - Cost of air pollution - Loss of argicultural land - Cost of noise pollution - Use of non-renewable natural resources - Loss of wetlands - Value of long-term environmental hazards - Loss of farmland +/- Net capital growth -/+ Loss of forest area and damage from logging roads +/- Changes in international position - Depletion of nonrenewable energy resources =ISEW - Carbon dioxide emissions damage - Cost of ozone depletion +/- Net capital investment +/- Net foreign borrowing = GPI

14 Development of main components of Finnish GPI in (1000 euros per capita in real prices)

15 Regional GPI measurements in Finland At Statistics Finland several regional GPI time-series have been calculated during for Uusimaa (Helsinki capital region), Päijät-Häme, Kainuu and Southern, Central and Northern Otsrobotnia regions as well as for Lapland. By land area these regional studies cover some 56% of Finland and they cover 50% of the population. Challenges: Administrative borders of areas have changed over time, missing and poor information: search for secondary data sources and their compilation, several components are more important for the outcome.

16 Regions of GPI measurements in Finland Lappland There are 15 Centres for Economic Development, Transport and the Environment in Finland. These Centres are tasked with promoting regional competitiveness, wellbeing and sustainable development, as well as curbing climate change. Northern Ostrobotnia Central Ostrobotnia Kainuu Southern Ostrobotnia Helsinki capital city area Päijät-Häme

17 Development of GPI in Finland and in some Finnish Regions (1000 euro per capita)

18 Development of GPI and GDP in Helsinki capital area in (euros per capita in real prices)

19 Development of GPI and GDP in Lapland in (euros per capita in real prices)

20 Division of Päijät-Häme GPI in (million euros)

21 Outcomes and analysis All calculated GPI-measures turned downwards in early 1990 s. Most important contributing factors were cumulative CO2 emissions to nature and past drainages of swamps (especially in three Ostrobotnia and Kainuu regions). Value of non-market services that increase welfare has grown significantly (home-work, value of leisure time) Since 1990 regions have taken debt from nature.

22 Yearly CO2 emissions in certain regions (million tonnes of coal)

23 Cumulative sum of carbon emission values from use of fossil fuels (million euro)

24 Continued research of regional GPI measures Report of regional Finnish GPI measures to be compiled by March In short/medium term, it would be beneficial if similar comparative GPI time-series could be compiled in other EU regions. These can be cost-efficiently prepared by students as a part of their final thesis. Thus we would learn more about the factors behind welfare in different countries and regions. In medium/long term, when the relevant data is compiled and analysed, we could advance by formulating new applied GPI measures that take into account most important characteristics of Europe.

25 Thank you!