Abstract
Many criticisms have been raised against the use of GDP as a measure of economic welfare. Although these criticisms may be justified, GDP arguably seems to remain the best measure of economic activity and could not be easily abandoned. It could, however, be adjusted for the ecological deficit that the production of goods and services creates. The Index of Debt to the Future (IDF) proposed in this paper adjusts the measured GDP by subtracting the part of GDP that creates the ecological deficit as estimated by the difference between biocapacity and ecological footprint. That part of GDP is a measure of the debt of the present generation to the future generations. The adjusted GDP, defined as the difference between GDP and the implied debt, is the net economic magnitude which the present generation should consider as its own. In addition to its simplicity, the proposed Index of Debt to the Future has the advantage of being easy to calculate with minimal marginal cost and easy to communicate to a wider audience.
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Data availability
The sources of data used are listed at the end of the manuscript. The data used are freely and publicly available.
The datasets generated during and/or analysed during the current study are freely available from the sources listed below.
Total biocapacity, Total ecological footprint, Ecological footprint of consumption (for countries).
Global Footprint Network, 2019 National Footprint Accounts. Data cover the range 1961–2016.
Direct links for countries used (last accessed Sept 28, 2020):
World: http://data.footprintnetwork.org/#/countryTrends?type=BCtot,EFCtot&cn=5001
Australia: http://data.footprintnetwork.org/#/countryTrends?type=BCtot,EFCtot&cn=10
Belgium: http://data.footprintnetwork.org/#/countryTrends?type=BCtot,EFCtot&cn=255
Netherlands: http://data.footprintnetwork.org/#/countryTrends?type=BCtot,EFCtot&cn=150
UK: http://data.footprintnetwork.org/#/countryTrends?type=BCtot,EFCtot&cn=229
USA: http://data.footprintnetwork.org/#/countryTrends?type=BCtot,EFCtot&cn=231
Gross world product
World Bank. Indicator: NY.GDP.MKTP.KD. Indicator name: “GDP (constant 2010 US$)”. Data cover the range 1960–2016. Available at https://data.worldbank.org/indicator/NY.GDP.MKTP.KD [last accessed September 26, 2020].
Note from source: GDP at purchaser’s prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in constant 2010 U.S. dollars. Dollar figures for GDP are converted from domestic currencies using 2010 official exchange rates. For a few countries where the official exchange rate does not reflect the rate effectively applied to actual foreign exchange transactions, an alternative conversion factor is used.
Notes
Newport (2018) reports that in a recent survey (February 2018), 34% of American citizens interviewed expressed the opinion that military and defence spending was too much, 33% that it was too little, and 31% that it was about right.
These indicators were an attempt to “help countries make informed decisions concerning sustainable development” and spanned many themes: from poverty and education to oceans, seas, and coasts (United Nations 2007). These indicators seem to provide valuable information for policy purposes; nevertheless it is not clear how they are connected with the sustainability part of development.
By market inefficiencies we mean the cases where market prices do not fully reflect the real costs of obtaining a product. If for example the production, consumption, or disposal of a product creates pollution, then its market price should reflect the costs that society has to incur to deal with the pollution. It is usually the case that prices only reflect the market price of inputs, but not the indirect costs to society from unaccounted inputs, pollution from production or disposal, health effects from product use, etc.
Of course, GDPEDF cannot be seen as an “available” quantity but this word is used to illustrate an analogy. What is meant is that GDPEDF denotes production corresponding to the available supply of resources.
The Global Footprint Network, the NGO that compiles the data on the ecological footprint is running campaigns to communicate the need for footprint reduction to the general public, including the production of material for educators and social media activities. https://www.overshootday.org/steps-to-movethedate/
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Lianos, T.P., Pseiridis, A. Adjusting GDP for ecological deficit: the Index of Debt to the Future (IDF). SN Bus Econ 1, 42 (2021). https://doi.org/10.1007/s43546-021-00041-0
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DOI: https://doi.org/10.1007/s43546-021-00041-0