Compendium: A global directory to indicator initiatives

Initiative Details

Title of Initiative Toward Sustainable Development: An Ecological Economics Approach
Lead Organization(s) School of Economics, Flinders University of South Australia
Description of Goal The project is designed to develop and calculate a range of economic and non-economic indicators of sustainable development (SD) for Australia (or for any nation). The development of alternative economic indicators begins with the recognition that GDP is not an adequate indicator of SD. The means by which an adjusted measure of GDP and a measure of genuine savings could be calculated at the national level is introduced. The shortcmings of these alternative indicators - albeit as more revealing of a nation's SD performance as they are - leads to the development of five separate national accounts to measure the five key magnitudes associated with the economic process. These are accounts to measure the "benefits" and "costs" of economic activity; natural capital, the throughput of matter-energy (i.e., the input of low entropy resources and output of high entropy wastes), and human-made capital. The annual estimates of each of the five magnitudes provides important information about the nature of economic activity in Australia over a given period. For example, the human-made capital account can reveal how much the Australian economy has expanded and at what rate. The natural capital account can indicate what has happened to the stock of natural resources as a consequence of their transformation into benefit-yielding goods. The benefit and cost accounts allow one to: (a) calculate the sustainable net benefits of economic activity in Australia over a given period (equivalent to the Index of Sustainable Economic Welfare and Genuine Progress Indicator), and (b) the efficiency with which natural capital is transformed into human-made capital. All five magnitudes can be used to calculate four component efficiency ratios that reveal information about the various aspects of the total economic process. The fact that economic indicators of SD rely on monetary estimates of the five key magnitudes outlined above means there is a need to supplement them with a range of non-economic indicators. Separate development and sustainability indicators can be calculated and then combined to assess a nation's SD performance.
Geographic Scope National
Framework for Indicator Set Economic indicators. 1. Benefit account includes a range of psychic benefit and disbenefit items, namely: (a) benefits - personal consumption expenditure weighted by an index of distributional inequality; services provided by the stock of consumer durables, public buildings, roads and highways, services provided by volunteer and non-paid household work; the value of leisure time; net producer goods growth; and the benefits provided by non-defensive public expenditure on health and education; and (b) disbenefits - current expenditure on consumer durables; cost of noise pollution, unemployment and underemployment; cost of private vehicle accidents; cost of commuting; and the cost of crime and family breakdown. 2. Cost account includes a range of lost natural capital services such as: cost of lost agricultural land; user cost of non-renewable resource depletion; cost of fisheries and timber stock depletion; cost of ozone depletion and long-term environmental damage; and the final total weighted by an "ecosystem health" index. 3. Sustainable net benefits of economic activity = total benefits less total costs - otherwise referred to as a Sustainable Net Benefit (SNB) index. This index indicates whether the growth of the economy is "economic" in the sense that the increase in the benefits of growth exceed/or are exceeded by the increasing costs of growth. 4. Benefit-cost efficiency ratio at the macro level = total benefits divided by the total costs. 5. Natural capital account includes measures of non-renewable resource stocks, timber stocks, fish stocks, agricultural land, water reserves, and wetlands. 6. Human-made capital account includes private and public sector stocks of plant, machinery, equipment, and buildings; business inventories; household dwellings; stock of consumer durables; and value of human of labour. 7. Throughput account is to be discussed but, due to measurement difficulties and a lack of sufficient data, the annual consumption of energy is used as a proxy measure of throughput. 8. Non-economic indicators of sustainability include measures of the national "ecological footprint".
Partners Research so far has involved consultation with Richard Sanders, a colleague at the Faculty of Environmental Sciences at Griffith University in Brisbane, Australia. Funding has come from scholarship funds during my time as a PhD student and general research funds available for academic staff while a lecturer at both Griffith and Flinders Universities.
Progress to date/future areas of work 1. The study period for this research was 1966 to 1995. Between 1966 and 1973/4, the SNB index for Australia rose. It then fell slightly between 1973/4 and 1979/80 before levelling out until around 1988/89. The SNB index for Australia has basically declined since 1989. Overall, the per capita SNB index for Australia fell during the period between 1966 and 1995. This indicates that growth in Australia has been largely "uneconomic" for the last twenty years, indeed, anti-SD! This is despite per capita real GDP for Australia rising throughout the thirty year period. 2. During the same period (1966-1995), Australia's stock of human-made capital continued to expand while the stock of natural capital declined. The efficiency with which natural capital was transformed into human-made capital also declined over the last fifteen to twenty years. In all, the alternative economic indicators of SD suggest Austalia has performed poorly in terms of moving toward SD.
Timeframe I intend to update the economic indicators of SD by the year 2001. I also intend to revise the methods used to calculate the individual items that make up the five accounts I described above. Finally, I intend to calculate the non-economic indicators of SD for Australia.
Presentation of the information and indicators The information has been presented at various conferences, in journals, and has recently been published in a book on sustainable development. Future updates will be published in journals as well as a book focussing more centrally on SD indicators.
Publications Some of the results have been published in the journal: Ecological Economics, Vol. 28, 1999, pp.213-229. A comprehensive presentation of the theory, methodology used, results, and conclusions drawn for the study can be found in: Lawn, P. (2000), Toward Sustainable Development - An Ecological Economics Approach, CRC Press, 500 pp., ISBN: 1-56670-411-1.
Initiative Locations Australia, New Zealand and Pacific Islands
Contact Person Dr Philip Lawn
Address School of Economics, Flinders University of South Australia GPO Box 2100, Adelaide, SA 5001 Australia
Fax Number 61 8 8201 5071
Telephone Number 61 8 8201 2838
Email phil.lawn@flinders.edu.au
Website http://www.flinders.edu.au
Public Access to Supporting Data no