Measuring well-being instead of gross state product: Genuine Progress Indicator relies on alternative economic measure

Academics at the University of Vermont are establishing a new system for evaluating the impact of social and environmental factors on the state’s economy.

The Genuine Progress Indicator or GPI is a parallel to the more traditional Gross State Product, which measures the state’s economic activity. The GPI puts a monetary value on factors like air pollution, water pollution and volunteer work. Benefits like clean water and flood protection by forests are given a positive value while costs such environmental damage, harm to human health, and loss of leisure time are assigned a negative value.

UVM’s Gund Institute for Ecological Economics is creating a cost benefit analysis or Genuine Progress Indicator for Vermont to help lawmakers understand how the state’s environmental quality and social well-being affect the overall economic picture. The Gund Institute will deliver its findings based on 2011 data to the Legislature in January, along with an explanation of how it was derived and suggestions on how the state can provide better information for future GPI calculations.

Sen. Anthony Pollina, P-Washington, says the GPI will give lawmakers another helpful lens for analyzing the state’s finances.

“It’s a different way to measure our economic, social and environmental well-being,” Pollina said. “Instead of just measuring the usual economic indicators which tell us how many things we made, and how many things we bought and sold, this actually helps us measure the impact of that economic activity on our lives and on our environment, and on our social well-being.”

Vermont is leading the way for other states, including Maryland, Utah and Oregon. Only Maryland has formally instituted a state GPI. (Gov. Martin O’Malley launched an online GPI tool in February 2010.)

Eric Zencey of UVM’s Gund Institute testifies before a legislative committee on Nov. 26. Photo by Nat Rudarakanchana

Jon Erickson, the institute’s former managing director, told a Statehouse committee on Monday that he and Eric Zencey, the Gund Institute’s coordinator on the project, spent the summer and fall vetting the concept with the Shumlin administration, attending educational and networking conferences, and researching Vermont-specific factors, such as the state’s shift from non-renewable to renewable energy sources.

Erickson said that GPI statistics could be available online by late next year. Work has begun on integration of the state’s comprehensive energy plan and GPI projections that map the plan’s potential impacts on the environment in the coming decades.

Eventually, Erickson told the committee, he hopes that GPI forecasts (with historical data modeling future trends) could be part of the state’s fiscal planning process.

The institute, however, has been hampered in the development of the GPI model by a lack of state funding and patchy data.

“This bill came with no appropriations, so that’s been an obstacle,” Erickson said in an interview. “The Gund Institute has had to go out to collaborate with other groups, to raise money to do the work.” As of Nov. 1, the institute had $20,000 in funding from the Lintilhac Foundation, UVM, and the state treasurer’s office.

The state didn’t fund the Gund Institute’s work initially, Pollina said, because its cost estimates, which ran into the hundreds of thousands of dollars, were inaccurate. In future, Pollina said he expects minimal GPI-related costs to be embedded into the budget-making process and shouldered by the state. He compared the GPI to the budget documents prepared by the Joint Fiscal Office and the governor’s administration.

“Once it becomes embedded in our policymaking process, then we will bear more of the costs,” said Pollina. “But it’s not going to be a big cost. This data is out there, it just needs to be collected and made sense of.”

Some of the underlying data for the GPI is already collected by others, said Erickson. But in other areas, such as information about how much time Vermonters spend commuting, on leisure, or on volunteer work, data needs to be gathered, likely via a statistically significant telephone survey.

In the meantime, Erickson pointed to the governor’s dashboard, which provides summary information on the state’s progress in areas like housing, jobs and education, as raw data that could be further processed as GPI output.

“Another obstacle is that this has come from the legislative branch, and has sort of met some resistance with the executive branch. So there’s just this kind of dance going on right now, to figure out who’s collecting the data, what it’s going to be used for, how it will be used in policy analysis,” said Erickson.

Lawmakers at the committee meeting seemed largely content with the GPI concept and progress made so far. But Sen. Diane Snelling, R-Chittenden, vice chair of the Government Accountability Committee, questioned whether the GPI, a macroeconomic indicator, could help measure the effectiveness of specific state programs.

“So my question is: if GPI is a macro-indicator, you still need something that’s closer to a program by program analysis,” said Snelling. “…Do you see how the GPI could then inform by program? Does that ever happen? Or does it just stay in a very big picture?”

Erickson acknowledged the limitations of the GPI, which doesn’t specify which state programs caused particular changes to different GPI indicators.

Erickson expects in coming weeks to formalize a memorandum of understanding between the state and the Gund Institute, which will clarify their respective roles in compiling the GPI, and will specify the state agencies that will provide information to the institute.

The memorandum will also contain more details on the Vermont Data Group, a commission that will categorize existing relevant data and recommend data gathering techniques.

Zencey also highlighted some high priority indicators for Vermont, which he’s already working to refine, including the cost of climate change, water pollution, and noise pollution, along with net forestland and farmland loss.

The Gund Institute produced the first state-level study of GPI in the nation in 2004, which showed that by one estimate, Vermont’s GPI has fared significantly better per capita than the national average, since 1980, largely due to Vermont’s record on environmental protection.

Vermont’s GPI is expected to model Maryland’s very closely. Click here to see the Maryland GPI.

Here’s a primer on GPI produced by the Gund Institute.

Editor’s note: The Lintilhac Foundation has contributed $1,000 to the Vermont Journalism Trust, the 501(c)3 organization that oversees VTDigger.org.