Finnish Welfare indicators

Transcription

1 Finnish Welfare indicators Finnish Environment Institute Dr. Jukka Hoffrén Adjunct professor (Applied statistics) University of Helsinki Jukka Hoffrén / University of Helsinki 1

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 Jukka Hoffrén / University of Helsinki 2

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 Jukka Hoffrén / University of Helsinki 3

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 Jukka Hoffrén / University of Helsinki 4

5 Commission on the Measurement of Economic Performance and Social Progress proposal in 2009 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 consumption, 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 Jukka Hoffrén / University of Helsinki 5

6 Stiglitz commission measures for Finland (per capita, real prices, year 2000) Jukka Hoffrén / University of Helsinki 6

7 Sustainable income Sustainable income corrects the gross income of an economy with deterioration of capital, defencive expenditures and deterioration of natural capital True income of a nation is the amount it can consume without diminishing future consumption possibilities. Hicksian income: HI = NNP - DE - DNC NNP = net national product, DE = defencive expenditures DNC = deterioration of natural capital It is impossible to price all the factors affecting wellbeing: Market pricing and artificial pricing Jukka Hoffrén / University of Helsinki 7

8 Beyond GDP GDP: Direct linkage to welfare is missing. Does economic growth benefit people? Instead of monitoring economic progress from production perspective we should monitor more closely the welfare received by the people. Since 1990 s welfare indicators have been designed to account for the actual welfare received by the people. 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 Jukka Hoffrén / University of Helsinki 8

9 ISEW and GPI for Finland Time-series for years in Statistics Finland R&D unit during 2000 s and 2010 s. First calculations of ISEW and GPI for Finland ISEW is based on Cobb s and Daly s ideas. Finnish GPI Calculation is based on the calculation of US GPI for years by Redefining Progress - organisation Due to data limitations, some parts of the Finnish GPI differ from the US GPI Jukka Hoffrén / University of Helsinki 9

10 GPI indicator 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 Jukka Hoffrén / University of Helsinki 10

11 Development of GDP, ISEW and GPI indicators in Finland in (per capita in real prices) Jukka Hoffrén / University of Helsinki 11

12 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 Jukka Hoffrén / University of Helsinki 12

13 Development of main components of Finnish ISEW in (1000 euros per capita in real prices) Jukka Hoffrén / University of Helsinki 13

14 Development of main components of Finnish GPI in (1000 euros per capita in real prices) Jukka Hoffrén / University of Helsinki 14

15 Yearly CO2 emissions in some regions (million tonnes of coal) Jukka Hoffrén / University of Helsinki 15

16 Cumulative sum of carbon emission values from use of fossil fuels (million euro) Jukka Hoffrén / University of Helsinki 16

17 Regional GPI measurements in Finland Regional GPI time-series have been calculated during for all Finnish regions as well as for Ahvenanmaa. Regional studies cover 100% of land area and 100% 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 Jukka Hoffrén / University of Helsinki 17

18 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. Pohjois-Pohjanmaa Kainuu Keski-Pohjanmaa Pohjanmaa Etelä-Pohjanmaa Central- Finland Ahvenanmaa Satakunta Varsinais-Suomi Pirkanmaa Päijät- Kanta- Häme Häme Uusimaa Jukka Hoffrén / University of Helsinki 18

19 Development of regional GPI in Finland (1000 euro per capita) Jukka Hoffrén / University of Helsinki 19

20 Best GPI regions in Finland (1000 euro per capita) Jukka Hoffrén / University of Helsinki 20

21 Worst GPI regions in Finland (1000 euro per capita) Jukka Hoffrén / University of Helsinki 21

22 Development GPI and GDP in Central-Finland (1000 euro per capita) Jukka Hoffrén / University of Helsinki 22

23 Development GPI and GDP in Satakunta (1000 euro per capita) Jukka Hoffrén / University of Helsinki 23

24 Local GPI measurements in Finland Finland s southerbmost region Uusimaa has been split into 4 local areas for local GPI calculations in 2013: 1. Helsinki capital city area: Helsinki, Espoo, Vantaa, Kauniainen 2. Central-Uusimaa: Tuusula, Kerava, Järvenpää, Kirkkonummi, Vihti, Nurmijärvi, Hyvinkää, Mäntsälä, Pornainen, Sipoo 3. West-Uusimaa: Hanko, Inkoo, Raasepori, Lohja, Nummi-Pusula, Siuntio, Karjalohja, Karkkila 4. East-Uusimaa: Porvoo, Askola, Pukkila, Myrskylä, Loviisa, Lapinjärvi Jukka Hoffrén / University of Helsinki 24

25 Development of GPI in Uusimaa in (euros per capita in real prices) Jukka Hoffrén / University of Helsinki 25

26 Development of GPI and GDP in Helsinki capital area in (euros per capita in real prices) Jukka Hoffrén / University of Helsinki 26

27 Outcomes and analysis All calculated GPI-measures turned downwards in early 1990 s. In some regions the recession was short and the direction is upwards. In some the negative trends are set to continue. Most important contributing factors were cumulative CO2 emissions to nature and past drainages of swamps (especially in three Pohjanmaa 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 Jukka Hoffrén / University of Helsinki 27

28 Future directions for Finland Financial and economic crisis: Share of industrial production in Finnish economy will shrink permanently; rise of standard of living most likely stops. Finland will transform to a service and information society, that hopefully is more sustainable. There is no clear vision about the necessary changes in the society yet. In the future there will most likely be no great source of welfare, but instead expert and welfare services, renewable energy, eco-efficient and green technologies, R&D, piloting and small scale specialised production, tourism, experiences. Customer perspective will emphasized Jukka Hoffrén / University of Helsinki 28

29 Towards new welfare measures ISI 2015 conference: Today Beyond GDP indicators are being developed in 32 EU member countries (excluding Finland which has dropped the issue from government platform). EU: Development of new welfare measures is a priority in the EU, but concrete results are missing. Independent researchers are rapidly expanding GPI calculations: GPI for Brazil 2015, GPI for China in 2014, and for several States (Maryland, Vermont, Oregon, Washington, Colorado, Hawaii etc.) Revised GPI 2.0 indicator has been outlined and first applications for USA, Maryland and Baltimore will be published in late Jukka Hoffrén / University of Helsinki 29

30 Thank you! Jukka Hoffrén / University of Helsinki 30