Additional Measures of Progress for Scotland? Dr Karen Turner Senior Lecturer, Department of Economics and Fraser of Allander Institute University of Strathclyde 4 October 07

Problem National income as currently measured not sustainable income Satellite accounting – ‘baskets’ of individual sustainability indicators Is it reasonable to measure and report sustainability in a single number or composite measure? Work with Scottish Government reporting to Steering Group on Additional Measures of Progress

Defining sustainability – Brundtland and Hicks Adjusted GDP/net savings measures GDP net of depreciation capital/productive capacity National rather than domestic product Different types of capital – distinguish types of natural capital Green Net National Product? Measurement issues Focus on depreciation and reinvestment in capital (Genuine Savings) Tend to correspond to Brundtland – Hicksian definition sustainable income…future generations But, focus may be wider: Global system sustainability - ‘importing sustainability’? Welfare, well-being, happiness of current generation? ‘Quality of life’ Appropriate to attempt to measure in single indicator?

‘Baskets’ of composite indicators Problem of ‘hidden’ or ‘cancelling’ effects Argument – not appropriate to integrate economic, well-being and environmental sustainability? Role of composite – to simplify and aid communication and comprehension ‘Basket’ of composites (each with underlying individual) may be appropriate) E.g. GDP, HDI and GS? (issue of international comparability)

Practical implications Combined use of composite and individual indicators (local and/or global concerns) ‘Hidden’ and ‘cancelling’ effects Large ‘baskets’ of individual indicators Complements rather than substitutes International comparability? Trade-off: Weights and components reflecting country-specific preferences Political process and preferences differ across countries Set against monitoring government/country relative to others

Key issues/questions arising (1) What do we mean by sustainability, what are Scotland’s sustainability objectives? i.e. what is/are a composite indicator(s) required to measure/reflect? Distinguish different types of sustainability concern Local quality of life and global system sustainability (and other where binding constraints apply) Different implications for the development and use of individual and composite indicators How is the indicator to be used? E.g. international comparability – trade-off indicator that is comparable with other countries with one that reflects local priorities and preferences

Key issues/questions arising (2) Should we consider ‘baskets’ of composite indicators? Different indicators for different objectives and purposes? Key feature of clarity of communication and comprehension Distinguishing issues that require the input of experts from those that are best addressed through the political process Valuation/measurement and technical aspects of aggregation Selecting and weighting components relating to QOL (welfare, well- being, happiness) If candidate indicators are identified, are data available to construct them to an acceptable standard? Pre-requisite to improve quality and reporting of economic, environmental and social data in consistent and compatible formats