Md.To Measure Economic Conditions from Main St. View

UM Research: Classic Economic Indices Inflate Wealth by 50 Percent

COLLEGE PARK, Md. - The State, with help from the University of Maryland, is introducing a truer, greener measure of prosperity and standard of living: the Genuine Progress Indicator (GPI).

The GPI will supplement the traditional index, the Gross State Product (GSP), which University of Maryland researchers say overstates significantly the level of prosperity as experienced by citizens.

"In addition to measuring our economic standard of living, this tool allows us to also factor in environmental and social costs of problems like air pollution, crime and income inequality, as well as the values of benefits like clean water, education and volunteerism," Governor O'Malley says.

Maryland's GPI Vs. GSP Click for large image

"This is not merely a question of dueling statistics - the difference in the two figures is startling and represents very different pictures of our standard of living," adds Matthias Ruth, director of the University of Maryland's Center for Integrative Environmental Research (CIER), which calculated the GPI for the state.

"In 2000, the classic economic measure, Gross State Product (GSP), showed Maryland more than 50 percent wealthier than we actually were, as measured by the GPI," Ruth explains.

"The traditional measure failed to capture many aspects of life we value - from environmental quality to livable communities. It also lumped many negatives, such as cost to undo the damages from economic growth, together with the positives." Armed with the more comprehensive data in the GPI, officials will have a more meaningful guide to policy, Ruth concludes.

If policy-makers had the GPI data back in 2000, would it have made a difference? Possibly, he says.

"With data that included not only benefits, but also costs of growth policies, we may have moved more rapidly towards sustainable practices - we may have invested more in communities that hold together, rather than roads that spread us apart, invested more in local jobs rather than an economy that moves them to far-flung places on this globe, may have invested more in energy technology that harnesses local, renewable resources like wind and solar, instead of burning more nonrenewable fossil fuels."

Ruth serves on the interagency working group of state officials that selected the measure. He and his colleagues at CIER coordinated the data collection and calculated the GPI back to 1960. They also developed a unique interactive online modeling tool that will allow policy-makers and citizens to track and forecast economic progress through 2060.

GPI FINDINGS AND FORECASTS

The GPI formula includes 26 economic, social and environmental factors, such as the costs of underemployment, commuting, pollution, crime, as well as positive contributions, such as the value of housework and social volunteering.

Matthias Ruth CIER director

Into the 1970s, the difference between the GPI and the Gross State Product was relatively small. But by 2000, the GSP was more than 50 percent greater than the GPI, Ruth found.

"A goal now should be to identify and reverse those drivers that made the two diverge," he concludes.

Ruth also developed a unique dynamic modeling tool that enables policymakers and the public to forecast how environmental, social and economic policies and investments will affect prosperity through 2060.

The CIER modeling shows that by 2060, maximizing efforts to create green jobs, clean energy savings and smart growth would each double the GPI.

While several nations and three U.S. states (Vermont, Minnesota and Ohio) have calculated their GPI, no other jurisdiction has attempted such an endeavor.

ROLE OF CIER

By combining expertise from multiple academic specialties, CIER has provided significant scientific expertise and environmental policy advice to Maryland agencies such as the Department of Natural Resources, the Department of Environment and the Governor's Climate Change Commission.

Previous CIER projects have included projections on the impact of home heating efficiencies; projected costs of delay or inaction on climate change; and the impact of Maryland's entry into the multi-state Regional Greenhouse Gas Initiative.

MEDIA CONTACTS:

Matthias Ruth, Principal Investigator
University of Maryland CIER
(202) 701-6484 (cell)
mruth1@umd.edu

Neil Tickner
UM Communications
301-405-4622
ntickner@umd.edu

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