Inside the Calvert-Henderson Quality of Life Indicators

We help you peek into the minds of a wide range of experts on trends in the US economy, society, and environment. We hope you see how statistics, which always lag the real world, have fallen further behind as global change has accelerated. You will find it easier to interpret the new politics of statistics and the proliferating debates about indicators and indexes of our national wealth, progress, health, and well-being. You can join the debates about whether the Consumer Price Index (CPI) overstates inflation (by up to 1.5 percent as the Boskin Commission reported) or if the core CPI is understated (because it omits energy, food, and assets such as houses). Our technical manual provides a statistical bedrock assessment of a wide range of key factors affecting the overall quality of our lives and our children's future. We have been delighted that so many copies have been ordered by statistical and government agencies in other countries and in the USA by local officials and politicians to use as a "recipe book" to construct local quality-of-life indicators for towns and states across one country. We have done the "intellectual ditch-digging," and we invite you to use our model, adapt or expand it for your unique community needs. Keep contacting us with your thoughts and suggestions.

All the world's industrializing societies are undergoing similar changes and restructuring, as they move from the earlier to the later stages of the Industrial Revolution. Part of this great transition is toward information-based economies. Here knowledge, intellectual capital, and the more intangible human and social assets replace manual labor and some of the tangible capital earlier economic textbooks called the "factors of production." This transition is often accompanied by a deeper knowledge of natural processes and ecological assets and the services nature provides. We slowly shift to recycling our industrial materials in closed-loop production, waste-reduction, re-manufacturing, and re-use. An industrial design revolution is quietly under way. A member of our Advisory Board, architect William McDonough is a leader in this design revolution, currently advising Mayor Richard Daley in his plans to make Chicago the "greenest" city in the USA. I am honored to be an advisor to Mr. McDonough in this initiative. This industrial design revolution is driven by the need to make human societies ecologically sustainable, which in turn will require greater equity -- closing the gap between rich and poor, between and within countries. Such a new agenda for humanity was endorsed by the world's leaders at the United Nations in 2000 as the Millenium Development Goals. But all societies still have a long way to go. The Calvert-Henderson Quality of Life Indicators help us keep track of US performance in all 12 areas to gauge improvement towards our goals.

How was it that macro-economic statistics fell so far behind in mapping these fundamental shifts? As I have pointed out for 20 years, a large part of the problem is that conventional economics and accounting considered air, water and nature's purifying cycles to be "free" goods. Only recently have textbooks begun to embrace "full-cost" prices, which account for all the social and environmental costs of production. Only in the past decade have we seen the rise of environmental and ecological economics, full-cost accounting, and life cycle costing for investment purposes. All this, together with the rise of social and environmental auditing - accounting for "intangibles" and intellectual property, the ongoing debate about how to measure productivity - and the many attempts to overhaul GNP and GDP represent an ongoing revolution in accounting and statistics. For example, better measures of ecological and biodiversity assets and the services they provide can help save rainforests, watersheds, wilderness and endangered species. Such services have been estimated at over $30 trillion annually. Scientists are still studying the complex ways that planetary systems, the Earth's atmosphere and oceans interact with all species to keep the climate stable and physical conditions hospitable to human life. The Encyclopedia of Life Support Systems, published by UNESCO (Paris, 2002) can be accessed at www.eolss.com. Leaders at the G-8 Summit, July, 2005, recognized the need for action to address global warming

On the foundations of conceptual innovators, a host of efforts to redefine human development, wealth and progress emerged in the 1980s and 1990s. David Morris of the Institute for Local Self-Reliance produced the Physical Quality of Life Index (PQLI) for the Overseas Development Council; Herman Daly and John Cobb created the Index of Sustainable Economic Welfare (ISEW) with Clifford Cobb in 1989. These indices deduct from GNP many "defensive" environmental and social costs, arriving at a significantly lower "net GNP." They have been adapted widely in Europe, Australia, and the United States as the Genuine Progress Index (GPI), published by Redefining Progress, whose former director, Mathis Wackernagel, who serves on our Advisory Board, was one of the creators of the Ecological Footprint Analysis(Wackernagel 1995). Other approaches include the Fordham University Index of Social Health mentioned earlier. In 1995, the World Bank released an innovative Wealth Index, which re-categorized the wealth of nations as comprising 20 percent environmental assets, 20 percent human-built capital (factories and other financial assets) and a full 60 percent as human capital and social capital. Slowly, such broader views of capital assets engender broader views of investment, which include those to improve health and education.

The Clinton Administration attempted to "green" the GDP by means of an Integrated Environmental and Economic Satellite Account (IEESA) developed by the Bureau of Economic Analysis (BEA) of the Department of Commerce in 1994. The Congress directed the BEA to halt this work and charged the National Research Council to review the entire issue. In late 1999, the Council issued its report, Nature's Numbers (National Research Council 1999), urging that the BEA be funded to re-start this effort. All this caused a major change in the economics profession. Many of its best minds embraced pieces of the new thinking, including Joseph Stiglitz, formerly the World Bank's chief economist and recent recipient of the Bank of Sweden Prize in Economics (in memory of Alfred Nobel), former Harvard economist Jeffrey Sachs, now advising the World Health Organization and President of Columbia University's Earth Institute, and Paul Krugman, winner of the John Bates Clark Medal, who teaches at Princeton University. The International Society for Ecological Economics (ISEE) and the Association for Evolutionary Economics (AFEE), both of which include me as a member, are in the forefront of reconceptualizing conventional economics.

Perhaps the most influential, widely used and quoted new formula is the United Nations Human Development Index (HDI), produced by the UN Development Programme every year since 1990. The HDI began by weighting per capita income (in terms of Purchasing Power Parity which corrects for fluctuating values of different currencies), education, and life expectancy to produce a rank for every one of the 190 member countries of the United Nations. The HDI updates and enhances its methodologies regularly, to include military vs. civilian budget ratios, environmental factors, poverty gaps, gender, and human rights data. The HDI has become a world benchmark on government performance and has given rise to some 50 national HDI versions. The 2002 HDI focused on Deepening Democracy in a Fragmented World (see www.undp.org) and the 2003 HDI focused on the Millennium Development Goals, the Compact, which commits the member states of the United Nations to cut poverty and increase funding for health and education, as discussed in Section II of the Update. The 2004 version's theme was migration, an important, largely unanticipated consequence of the globalization of finance markets and technology (see the update section "The Global Boom in Indicators")

The deeper methodological debate over new measures of wealth, progress, and human development has concerned the extent to which money coefficients and macroeconomic models can capture broad new areas of concern: human rights, health, education, environmental, and overall quality of life. Many things humans hold most dear cannot be measured in money terms. These debates characterized the ICONS conference in Brasil, November 2003, discussed in the Indicators: Past, Present, and Future section of this Update. Conventional methods currently weight all data from different economic sectors into one index. Defensive expenditures, such as cleaning of pollution, costs of accidents or insulating houses near airports from aircraft noise, are all added to GDP as more production - mixing in these "bads" with the goods. Many believe, as we do with the Calvert-Henderson Quality of Life Indicators, that aggregating all these "apples and oranges" into one index is inappropriate and often confusing. Another issue concerns the use of "satellite accounts" for such environmental and social data. This designation gives an impression of lesser value for such important data.

Quality-of-life indicators should not rely too much on subjective opinion surveys and focus groups exploring personal satisfaction or happiness. Even scientists poorly understand threats to quality of life in many areas, and often the public is ill informed or misinformed about toxic substances, climate change, budget priorities, human rights and many other factors affecting personal satisfaction and quality of life. We further believe that the diverse areas of quality of life covered in the Calvert-Henderson approach deserve their own metrics, specifically metrics that are most appropriate within the diverse disciplines that study such fields. For example, money coefficients cannot quantify human rights, air and water quality, recreational satisfaction, education, health, public safety, or national security. Money measures and percentages of national budgets can give clues about quality of life but are often simply input data. Composite indices do not measure outcomes or results.