In a new paper published in Philosophical Transactions of the Royal Society, Sir Partha Dasgupta makes the point that the problem with gross domestic product is the gross bit. There are no deductions involved: all economic activity is accounted as if it were of positive value. Social harm is added to, not subtracted from, social good. A train crash which generates £1bn worth of track repairs, medical bills and funeral costs is deemed by this measure to be as beneficial as an uninterrupted service which generates £1bn in ticket sales.
Most important, no deduction is made to account for the depreciation of natural capital: the overuse or degradation of soil, water, forests, fisheries and the atmosphere. Dasgupta shows that the total wealth of a nation can decline even as its GDP is growing. In Pakistan, for instance, his rough figures suggest that while GDP per capita grew by an average of 2.2% a year between 1970 and 2000, total wealth declined by 1.4%. Amazingly, there are still no official figures that seek to show trends in the actual wealth of nations.
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