Bellerbys Economics - Mr Stephenson

Tuesday, September 04, 2007

Happy Planet Index

During the first steps in Module 6, we will be looking at the standard indices for economic well-being - GDP, PPP, HDI and so on. We will then be concentrating on GDP, Economic Growth, the Economic Cycle and the causes of short-term and long-term economic growth.

However, before we get too deeply sucked into what might be called traditional economics, it can be fun to look at some of the other work that is going on in this field at university level.

The New Economics Foundation produces the Happy Planet Index - this attempts to analyse GDP in relation to the amount of Carbon Dioxide that is produced - in this ranking, the UK comes 21st out of 30 European nations - with Iceland coming out top. You can read more about the Index here:

http://www.neweconomics.org/gen/z_sys_publicationdetail.aspx?pid=244

Interestingly, when I clicked on the page above, I received a pop-up advertising cheap air travel linked to their site!

The Canadian Government have attempted to create and Index of Economic Well-being that takes into account income, wealth, inequality and economic security. The work was done for the MacDonald Commission and can be viewed here:

http://www.csls.ca/iwb.asp

The Genuine Progress Indicator is a recent attempt to link economic growth with the environment. There's a good Wikipedia article on this here:

http://en.wikipedia.org/wiki/Genuine_Progress_Indicator

The Chinese government also recently attempted a similar exercise but abandoned it when it emerged that it showed very little progress in some provinces.

The Big Mac Index, organised by the 'Economist' started out as a fun way of looking at economic well-being and PPP. It started by measuring how long you have to work in order to buy a Big Mac in your country. It's very crude and was never intended to be taken seriously. However, it can also be used as a way of estimating whether your currency is over- or under-valued, as we can see here:

http://www.economist.com/markets/indicators/displaystory.cfm?story_id=8649005

It took on greater significance recently when US commentators used the index as a way of claiming that the Chinese government was deliberately under-valuing the yuan by linking it to the dollar.

It's perhaps the European Union that has taken this whole field of social indicators into the 21st century. It uses a net of indicators called the Laeken Indicators:

http://en.wikipedia.org/wiki/Laeken_indicators

The great debate in economics, of course, is which of these indicators are truly independent indicators and can therefore be combined into a super-index and also - which of these indicators are leading, contemporary or lagging. As undergraduate and post-graduate students, you will enter the debate when you progress to your university - but for the moment, let's focus on GDP!

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