MISMEASURING OUR LIVES GDP – Gross Domestic Product HDI – Human Development Index List the examples of how we get the two mixed up. Economic growth is a typical example. It is only one of many means to the end of improving well-being. We believe we understand what motivates the individual – economic rationality. But we know humans act out of emotion (anger, passion, frustration etc)

The Right Question What do we really care about? HUMAN WELLBEING So what do we want to measure and track?

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

Interlinkages and Human Well-Being-JSSA. (Tanaka, 2005) Level of local nature Level of physical unhealthiness Level of mental unhealthiness Physical Mental Source: JSSA 2011

Score Card -HDI Measures health and education in addition to income as constituents of well-being No environmental dimension Sustainability- Snap shot in time

WE MANAGE WHAT WE MEASURE KEY PRINCIPLES VALUES SUSTAINABILITY EQUALITY TRADE-OFFS AND SYNERGIES

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

IWI: The Coupled System

The Capital Asset Base Social Capital Natural Capital Human Capital Produced Capital

INCLUSIVE WEALTH Value of Assets = Inclusive Wealth Inclusive Wealth is the SHADOW PRICE of the asset multiplied by the QUANTITY STOCK of asset

Trade-Offs and Synergies Substitution between capital assets Critical Capital Stocks Inter-dependency among Capitals Shadow Prices Rate of Substitution Externalities

Natural Capital Non-Renewable Resources Renewable Resources Oil, Minerals Renewable Resources Ecosystem Services

Ecosystem Services Provisioning Regulating Cultural

Shadow Prices Strength and Achilles Heel How do we compute shadow prices? Coupled Systems Modeling

IWI IWI per capita

Average annual growth in IWI per capita

Average annual growth in IWI per capita

Average annual growth in IWI per capita

Average annual growth in IWI per capita

AVERAGE ANNUAL GROWTH RATES DISAGGREGATED BY NATURAL CAPITAL TYPES

ANNUAL GROWTH RATES DISAGGREGATED BY NATURAL CAPITAL TYPES Agricultural Land Forest Resources Minerals Fisheries Fossil Fuels Natural Capital Index  

KEY DATA SOURCES RESOURCE DATA SOURCE Agricultural Land Food and Agricultural Organization (FAO) Fisheries Sea Around Us Project database (SAUP) Forest Resources Fossil Fuels United States Energy Information Administration (EIA) Minerals United States Geological Survey (USGS)

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

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