What is it?
The Genuine Progress Indicator is built on a deceptively simple insight: GDP counts everything as positive. When someone gets divorced and pays legal fees, GDP goes up. When an oil spill is cleaned up, GDP goes up. When a forest is logged, GDP goes up. The GPI starts with the same personal consumption data as GDP, then makes 26 adjustments — adding things that create genuine wellbeing, and subtracting things that reduce it.
Why was it developed?
The GPI was developed in 1995 by the think-tank Redefining Progress as a direct response to what they called the "GDP trap" — the political obsession with growing an indicator that doesn't distinguish between economic activity that helps people and activity that harms them. It was an attempt to build a better bottom line for the economy.
How does it work?
The GPI starts with personal consumption expenditure (the largest component of GDP) and then:
- Adds: the value of unpaid household work, parenting, and eldercare.
- Adds: the value of higher education and volunteer work.
- Adds: services from consumer durables and public infrastructure.
- Subtracts: the costs of income inequality (growth that only benefits the wealthy counts less).
- Subtracts: the costs of crime, family breakdown, and loss of leisure time.
- Subtracts: the costs of environmental degradation — water pollution, air pollution, loss of wetlands, loss of farmland.
- Subtracts: the depletion of non-renewable resources.
- Subtracts: the costs of long-term environmental damage including climate change.
What does GDP miss that this captures?
GDP is structurally incapable of distinguishing between economic activity that improves lives and activity that degrades them. The GPI attempts to make this distinction explicit.
- The value of a parent raising their own children is zero in GDP. In GPI, it's a major positive.
- An oil spill cleanup adds to GDP twice — once for the damage to tourism, once for the cleanup costs. GPI subtracts both.
- Growing inequality means GDP growth benefits fewer people — GPI adjusts downward when inequality rises.
Real-world use
The GPI has been adopted at the state level in the United States and studied internationally.
- Maryland became the first US state to officially track GPI alongside GDP in 2010.
- Vermont and Hawaii also report GPI, finding that genuine progress peaked in the 1970s despite continued GDP growth.
- A landmark 2013 study found that for 17 countries, GPI peaked around 1978 while GDP continued rising — suggesting growth has become increasingly "uneconomic."
- The European Commission has used GPI-style thinking in its "Beyond GDP" initiative.
Limitations
The GPI is more comprehensive than GDP, but it has methodological challenges:
- Some variables are genuinely hard to measure objectively — what's the monetary value of a wetland?
- The weighting of different factors is a value judgment that different analysts make differently.
- It requires a lot of data that isn't always available, especially for developing countries.
- The focus on monetary valuation of non-market goods is itself contested — some argue nature and care shouldn't be given a price.
The GPI is the most technically rigorous attempt to create a "better GDP" — one that keeps the economic measurement but fixes the accounting. Its finding that genuine progress peaked decades ago despite continued GDP growth is one of the most important and underreported findings in modern economics.
Related GDP alternatives
Standard GDP with one crucial adjustment: subtract the cost of environmental destruction.
A safe and just space for humanity: above the social foundation, below the ecological ceiling.
How efficiently does a country convert natural resources into long, happy lives for its people?