The Living Economy

[This is a chapter that I decided not to include in my book, The Age of Thrivability: Vital Perspectives and Practices for a Better World. I’m not a trained economist, and so I feared that it may contain fundamental flaws in logic, despite extensive research. Still, my sense is that it seems only to have increased in potential relevance and importance since I first wrote it, so I share it here with an eager invitation for constructive commentary. What’s solid and exciting? What raises questions? What’s worth exploring further? What’s just wrong? Thank you for your contributions!]

Shopping inside air conditioned malls or making purchases online, it is easy to believe that the natural world exists only as an “externality” and that its rules do not apply to our economic activities, as Mechanistic Economics would have us believe. But new, emerging theories help us recognize that the economy is a living subsystem of the ecosystem, an embedded and integral part of nature. For example, ecological economists focus on a society’s metabolism, which they define as “the flows of energy and materials that enter and exit the system.” And evolutionary biologist Stuart Kauffman talks about the “econosphere,” noting that the economy exhibits biological tendencies because it literally is a biological entity. These should be very appealing views: nature is inherently creative, adaptive, self-regulating and sustainable — highly desirable qualities in our economies and organizations.

The goal of this chapter is to show that such a new economic theory, based on the emerging life-centric worldview, is steadily coalescing and rising to dominance. Though there is not yet complete consensus about what this new vision is, this chapter presents a set of patterns that seem to be emerging from many different theories. What they all have in common is a desire to breathe new life into the field of economics — literally and figuratively. Each seeks to reconcile the reductionist machine metaphor of mainstream economics with the living, breathing, integral reality within which we actually exist.

And indeed, we can easily recognize the five defining aspects of living systems [described elsewhere in the book] in our economies:

• They have divergent parts (individual people, myriad resources, companies, institutions, governments).
• Economies exhibit patterns and structures of relationship and responsiveness both internally and with their surrounding context (the natural environment, cultures, neighboring economies).
• Divergent parts come together in those patterns of relationship to form a transcendent, convergent whole (an economy) with emergent defining properties of its own.
• There is an unseen, self-organizing property (Adam Smith’s “invisible hand” comes to mind, as does Friedrich Hayek’s “spontaneous order”) that integrates parts into that coherent, connected and transcendent whole.
• The fundamental nature of economies is regenerative and creative.

What is new since Adam Smith’s day is that:

• We increasingly recognize that our self-interest cannot be separated completely from the interests of the whole.
• We have more complete information than ever before about the needs of the parts and the whole, giving us an expanded definition of self-interest.
• More and more of us are able to hold the seeming paradox of acting in individual self-interest and also in the interest of the whole.
• And our understanding of what constitutes the “whole” has broadened to include the environment and all of humanity.

What has also changed is that we are faced with rising social, financial and environmental crises that can no longer be ignored, forcing us to evolve our thinking in search of new solutions.

What, then, might be the defining principles of such a new economic theory? A review of the alternative hypotheses, together with a glance at the Living Systems Model, suggests the following tenets:

• Living Economics views an economy as an open, dynamic living system whose natural and ongoing outcome — given the proper conditions and the absence of barriers — is transcendence (that is to say: creation, adaptation, innovation, evolution and regeneration).
• Living Economics defines an economy as any interaction between two or more people, in which one has a valuable contribution to offer the other and a mutually beneficial exchange is enacted. National and global economies have become vast and infinitely complex, but the simple interpersonal transaction remains their basic unit. Living Economics, then, is concerned with the nature and goals of such interactions, individually and in their aggregate patterns.
• Living Economics recognizes that, as people come together in interaction and exchange, a new higher level form of life emerges. Two or more parts (people, organizations) come together to create a whole (a living economy). If the proper conditions are in place, the core essence of life flourishes within this whole and it then takes on properties of self-organization and transcendence, exhibiting behavior that cannot be understood solely by studying the behavior of the parts.
• Living Economics recognizes that humans, like all living things, are driven to create and transcend. This is made possible through connecting with others, ideally to make a life-enhancing contribution that may then be integrated into the whole. Thus, Living Economics views the purpose of economic activity at any level (global, national, regional, organizational or individual) as (1) enabling connection and contribution (2) in order to engage the integrative and innovative power of the unifying spark of life as fully as possible (3) in the ongoing pursuit of transcendence.
• In summary, Living Economics is the study and support of the dynamic patterns of interactions between individuals, organizations, communities and the natural environment in the continuous and iterative pursuit of life’s enduring urge to transcend itself.

This is a tremendous departure from Mechanistic Economics.

And yet, at the beginning of the last century, Harvard economist Joseph Schumpeter foresaw much of this thinking. Instead of incremental improvements to existing processes, as Mechanistic Economics proposed, he emphasized the creation of new processes. “Entrepreneurs regularly introduce innovations that upend the established order, unleashing a ‘gale of creative destruction’ that forces incumbents to adapt or die.” This “process of industrial mutation,” he explained, “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”[1] In his view, this is how economies evolve — a decidedly biological concept.

With this in mind, the emerging theory grants the option of adapting within an unpredictable, ever changing environment, and also of integrating novelty in contribution to the convergent whole. In Mechanistic Economics, our only means of progress was to go bigger. Living Economics gives us the option of becoming different, better and special.

What, then, are the practical implications of this new set of views and the new interpretations of reality they seem to be ushering in?

Though the discipline has not quite coalesced enough at this point to present a detailed, definitive set of principles and practices, it seems clear that the rise of Living Economics will alter:

1. The goals of economists and economic activity.
2. The measurement of economic activity.
3. The ways we encourage the economic system to work better.

These three topics will be explored below.

1. The goals of economists and economic activity.

According to mainstream thought, the goal of macroeconomic activity is to keep the production/consumption machine churning and growing so we all have the jobs and income we need to survive. This income then allows us to consume more, which signals companies to produce more, which then supports more jobs and income, and so on in a never-ending and ever-expanding cycle, as depicted in the following diagram.

So important is ever-increasing consumption to this cycle that father of modern macroeconomics John Maynard Keynes considered recessions and depressions a problem of “underconsumption.” This is why the 2009 US economic stimulus package, inspired by Keynesian ideas, was designed to encourage consumer spending. Keynes even viewed savings as counterproductive, preventing income from entering the consumption/production cycle.

The challenge we face in overturning the dominant economic concept is that there is undeniable logic behind the current emphasis on production and consumption. It all makes sense — and indeed has been borne out in the market — until you consider that the current economic system’s ability to support life is steadily diminishing with every turn of the production/consumption wheel. Though it may produce jobs and generate increasing monetary returns on investment (at least up to a point), the current economic system is also decreasing the real vital capacity of our complex life support systems. It is becoming more and more evident that, pursued relentlessly in isolation of other factors, the Mechanistic economic belief set is detrimental to human health and therefore to the health of the economy.

Dissenting economists generally share the observation that ever-increasing production and consumption of material “stuff” is not the sole measure of individual welfare and economic vitality, as Mechanistic Economics would have us believe. Moreover, it cannot continue to be the single defining goal that we pursue, or the Earth will no longer be able to sustain us. Despite their unanimity, however, there is far less agreement about a viable alternative model.

To move beyond this impasse, we may look to nature for inspiration. Nature also pursues a never-ending cycle in which growth features prominently. The outcome of that cycle is endlessly increasing diversity: in options, in adaptability, in the ability of life to flourish and prosper. Somehow, it creates increasing returns on effort, as every turn of its wheel makes the system richer and more robust — more thrivable, as I would say.

What’s the difference, then, between nature’s growth cycle and our own? The difference lies in two things: (1) the goals of those participating, and (2) the other stages of nature’s cycle of life, in addition to growth.

Let’s start with what nature has to teach us about the role and goals of participating actors within the cycle of life.

In nature’s cycle of life, every living entity functions as an integral part, working always to make a life-enhancing contribution to the wholes to which it belongs. Only humans believe that we stand somehow apart from each other and the rest of the world, existing only to consume. The problem, then, is with our emphasis on consumption rather than contribution.

Think about it: is it any wonder that our economic system is self-destructive when we call ourselves “consumers”? We are consuming the Earth’s resources, just as our economic theory tells us we should, without any obligation to return any of that natural wealth back into the system. The word “consumer” gives us no sense of mutual responsibility or interconnectedness with each other or with the rest of the ecosystem. And the word “employee” is hardly better — when we’re not using up resources, we’re being used (employed). “Labor,” “Human Resources” and “Human Capital” take the point even further.

Imagine, instead, if we thought of ourselves as contributors to (rather than consumers of) life’s richness and possibilities. Imagine if our economic cycle were intended to enable life-enhancing contributions, instead of just jobs.

In fact, in a living economy, there is little distinction between providing and purchasing — between offering contribution (“jobs”) and accepting contribution (“consumption”). They are two sides of the same coin, each representing valued participation in the living economy. As we spend money, we contribute resources to the flow of life. Even the word “currency” — which means “flow” — supports this concept.

Such a view reinforces awareness of the impact of our purchases and the responsibility that comes with them. It invites us to seek out products and services that make a life-enhancing contribution to all involved. Indeed, this is something we see happening already with the rising popularity of Fair Trade, organic and cruelty-free products.

With this understanding, the diagram might look something like this:

Focusing on contribution instead of consumption opens up the possibility of exchanging value without necessarily generating income or producing a tangible good, as the arrow in the middle of the diagram indicates. This potentially solves the mainstream economist’s dilemma of how to account for volunteer work and unpaid childcare or elder care — and how to account for the growing gift economy.

With this in mind, we might even collapse our diagram to show that increased income enables people to make increasing contributions (in the form of purchases, investments or donations), which triggers increased production (of goods or services), which enables increasing contributions (in the form of work projects), which leads to increasing income, and so on.

In all, production might come to be seen as the sharing of our gifts. Our understanding of income might be expanded to recognition or gratitude in its many forms, including but not limited to money. And this endless loop of economic contribution may come to be powered by compassion or even love, born out of recognition of the unity of all life.

Designer and community builder Milenko Matanovic expresses this concept beautifully. Though he is speaking of selling artwork, the same principles apply to work of any kind.

…[J]ust as the sale of one’s work is necessary for the livelihood of the worker, so a spiritual giving of the product of work is necessary for growth and creativity. In so doing, the artist acknowledges that the created thing acquires a new layer of meaning as it is received by others. This completes the cycle by enriching the community and clearing space within the artist for a new beginning. In the end, there should be three results: completed artwork, a wiser person who grew within the creative process, and an enhanced community gifted with a new way of seeing, hearing or thinking.[2]

This conceptual shift from consumption to contribution (or even compassion and love) is essentially a new story about our economic lives. And this new story has the power to change everything: how we craft organizational strategy, what we expect from our work, what kinds of products we’re willing to create and buy, and how we interact with each other in transaction and in collaboration.

Such a new story and the changes that come with it seem to be exactly what are urgently needed. In Daniel Quinn’s 1992 philosophical novel, Ishmael, the wise protagonist — who happens to be a telepathic gorilla — explains:

There’s nothing fundamentally wrong with people. Given a story to enact that puts them in accord with the world, they will live in accord with the world. But given a story to enact that puts them at odds with the world, as yours does, they will live at odds with the world. Given a story to enact, in which they are the lords of the world, they will act as the lords of the world. And, given a story to enact in which the world is a foe to be conquered they will conquer it like a foe, and one day, inevitably, their foe will lie bleeding to death at their feet, as the world is now.

With such a new story and new goals to go with it, how will we resolve the persistent problem of growth? Clearly, humanity’s physical presence on Earth cannot continue to expand indefinitely. Paradoxically, however, Living Economics would suggest that it is not necessary, desirable or even possible to eliminate growth as a core factor of the economy. As we’ve seen, living systems have an inherent urge to connect and create novel forms — which equates to growth. Says physicist and author Fritjof Capra, “Growth, of course, is characteristic of all life.” But he goes on to offer an important qualification: “[I]n the living world, it has not only a quantitative but also a qualitative meaning. For a human being, for example, to grow means to develop to maturity, not only by getting bigger, but also qualitatively through inner growth. The same is true for all living systems.”[3]

Shutting off this urge to grow is impossible. Certainly, humans can deny our strongest urges if we must, but the situation will be unnatural, uncomfortable and, therefore, not sustainable.

Where, then, does that leave us? How do we develop an economic model that includes an appropriate level — and type — of growth?

Part of the solution is to be found in a model called the Adaptive Cycle.[4] Developed by C.S. Hollinger and elaborated by Frances Westley, the model shows that natural systems exhibit a continuous four-part process (typically depicted as a figure eight) of:

1. Germination followed by
2. Growth followed by
3. Consolidation followed by
4. Death and renewal, returning to germination, and so on.

The solution may not be the total absence of growth — it may instead be a proportionate increase in economic death and renewal.

This may not be as bad as it sounds. Some options — offered for illustration — might include:

• Producing only those goods that can be returned into the system fully and relatively quickly as germination (cradle-to-cradle manufacturing). Making such “good” products cheap and “bad” products very expensive.
• An increased proportion of economic value generated by intangibles, which can germinate, grow and consolidate without taxing the living system. This trend is already underway, with both the expansion of technological and service sectors of the economy and the individual shift toward connection, contribution and sustainability.
• Reducing the pressure on companies to grow rapidly and incessantly (removing the legal obligation, encouraging new forms of governance, such as b-corporations and cooperatives, and revising the general understanding of organizational purpose).
• Enabling failing companies to die so that the diversity of the economy is preserved — and so that society is not obligated to prop up companies that are “too big to fail.” This harkens back to Schumpeter’s concept of creative destruction.
• Providing a social safety net (sometimes referred to as a social dividend) that allows for entrepreneurial experimentation — including healthy failure.
• Fundamentally reforming the financial industry (debt and speculative markets, in particular) (1) so that it no longer over-stimulates growth unnaturally and faster than that growth can be processed through to renewal and (2) so that it no longer jeopardizes an economy’s resilience with excessive debt-to-GDP.

With changes of this sort, economic value could continue to grow without limit, but material production would ideally net out to zero growth, in what some economists refer to as “dynamic equilibrium” or a “steady-state economy.”

This raises the challenge of determining just how much growth would bring us to an equilibrium state. And it may be that the Earth will give us the answer. As it stands, when consumer spending falls, this triggers the US Federal Reserve Bank to lower interest rates in order to stimulate more spending. Instead, perhaps we’ll need a system in which any reduction in the health of the biosphere would trigger a tightening of financial stimulus to growth.

In all, Living Economics shifts from a sole focus on encouraging material growth to the more expansive goal of creating the conditions for life to thrive.

2. The measurement of economic activity.

Such a fundamentally new economic story, featuring new roles and goals, will undoubtedly necessitate new economic indicators. And indeed, the need to look beyond GDP has long been acknowledged and embraced by leaders around the globe. Multidisciplinary teams have been trying to answer this call for several decades, with economists Hazel Henderson, Herman Daly, Robert Costanza and a host of others leading the charge. Henderson explains how GDP could be adapted to offer a more complete picture:

To correct GDP, we must begin sorting out the “goods” from the “bads” and deduct all the social and environmental costs of production to calculate the “net” GDP…. Likewise, companies need to internalize on their balance sheets, all the social and environmental costs of their products. This way, consumers will pay these full costs of production in the price of products. This, in turn, will mean re-designing their product lines to minimize pollution, waste and social harm. Products will become safer, cleaner and “greener” while some goods will disappear.[5]

But as Henderson and others are quick to point out, even a new-and-improved GDP will not be enough. If our goal is the full vitality — and “thrivability” — of the system, we need information about the subtle aspects of individual and organizational contribution.

Happily, a range of new indicators has been developed and proposed in recent years, with eleven of the top contenders described in a table at the end of this chapter. Some are more comprehensive than others, and they have varying points of emphasis. What unites them, though, is their focus on a broader definition of progress and well-being.

Even with an expanded GDP and new, more broadly descriptive indicators, current quantitative measures like unemployment rates aren’t likely to fall completely to the wayside. But what probably will fall to the wayside are pronouncements of these figures in isolation. Talking about unemployment rates alone, for example, doesn’t help us understand why unemployment is high or low or what actions would be most appropriate in response to the situation. And it doesn’t tell us about the quality of the employment there is. Today’s partial information contributes to our view that we are at the mercy of a little-understood and regularly malfunctioning machine called The Economy. It invites us to place all the power — and blame — into the hands of one leader, the nation’s fix-it man or woman. Instead, we will be better served by a more comprehensive set of indicators accompanied by wisely interpreted narratives that give us a broader understanding of the true nature of the living economy.

It is not at all clear which of the new, broader and narrative-based indicators will rise to dominance, if any. But the search is most definitely on.

3. What we do to encourage the system to work better.

Within mainstream economics, the core debate has centered on whether the economy is able to self-regulate or whether it must be actively managed by the state. Harvard political economy professor Dani Rodrik describes these two camps as follows:

• Capitalism 1.0:The “miracle of markets” as a creative, dynamic “engine” requiring a minimal state. This view came into favor with Adam Smith’s The Wealth of Nations.
• Capitalism 2.0: The Keynesian view that markets aren’t self-creating or self-regulating and need to be “embedded” in a wide range of guiding institutions. This view rose to dominance with the Great Depression and World War II and continues to be the guiding philosophy of most Western nations.[6]

Though the debate over these two views has raged on in academic circles, for the past seventy or eighty years the role of leaders and economists has generally been as manipulators of the machine, particularly in times of economic recession. At such times, the machine metaphor (or, more specifically, John Maynard Keynes) suggests that you just have to inject cash into the system to spark consumption, akin to jump-starting a car engine. With this in mind, macroeconomic interventions have been designed to stimulate the economy from without, primarily through direct payments to citizens and through government funding of infrastructure improvement projects.

Even if this actually succeeds in stimulating the economy — and there is debate over this as well — the first problem with such an approach is that it is necessarily accomplished through amassing a sizable debt that must be repaid with interest. Principal and interest payments continue to mount, as the business cycle brings another recession every few years, signaling the government to take on yet more debt. This tendency seems to be especially prevalent — and problematic — in the United States. According to an Associated Press article issued on August 25, 2009: “[T]he White House is predicting … [that] by the next decade’s end the national debt will equal three-quarters of the entire U.S. economy…. Even supporters of President Obama’s economic policies said the long-term outlook places the federal government on an unsustainable path….”[7] At some point, debt payments will become an unsupportable burden on the system.

The second problem with the external “jump-start” approach is that it doesn’t address why the car has run out of power to begin with, or how to enable it to start well the next time around. And it doesn’t enable us to see which features of the system — including the interventions themselves — are exacerbating cyclical downturns.

What, then, will be the role of leaders in Living Economics — or Capitalism 3.0, as Rodrik might call it? With a view of the economy as a living system, economic leaders will likely be less fix-it men and women and more gardeners or farmers, actively cultivating the fertile conditions for life’s processes to flow naturally. Importantly, this view integrates the two earlier renditions of capitalism, embracing the seeming paradox that both theories can be right and finding novel solutions in the tension between them.

This is more than just a cute new metaphor or even an attitude change. It represents a fundamental shift in what is done, by whom. More and more leaders are coming to recognize that the economy is not an artificial, external man-made construct (as Mechanistic Economics claims); it is the living pattern of people engaging with each other in pursuit of creative, emergent potential. With this view, it becomes clear that the economy encompasses more complexity than any leader can anticipate or manage, particularly as monumental debt repayments limit government resources to intervene and as our goals expand beyond the tangible and measurable. There will continue to be a need for wise intervention and guidance at a national, macroeconomic level, particularly in ushering in the structural changes described in the paragraphs about growth. But as ordinary citizens, we’ll also increasingly recognize our own role and responsibility in shaping the economy.

Tom Atlee, founder of the Co-Intelligence Institute, concurs: “[C]entralized approaches cannot adequately deal with the complexity and urgency of emerging crises. These require more systemic, distributed, self-organizing approaches.”[8]

For this reason, we’re likely to see more and more participatory processes in which people within communities come to a shared understanding of the economy’s current conditions and what they’re doing to create those conditions. And we’ll see more examples of community-based collaboration to develop and enact a new vision for the future, along with ongoing collective learning about what has already been done.

In contrast to classic Mechanistic interventions, such approaches will be designed to build the lasting capacity of the economy from within. It’s the proverbial teaching a man to fish — or, more precisely, creating the conditions for him to learn — rather than simply giving him a fish. It’s about enhancing the resilience of a community and supporting its ability to solve its own problems. This is the spirit of interventions within living economies.

Atlee describes how this approach could work, and indeed is already working in many places:

We need to extend our vision of participatory governance to embrace citizen engagement not only in decision-making but also in action and the kind of review, evaluation and course-correction that characterize collective learning. Collaboration would come to mean real ongoing partnership between officials and community because the situations we face are simply too challenging to handle otherwise….

As collective intelligence and community wisdom come to be seen as vital aspects of public participation, the role of government will necessarily shift. Effective management and leadership become less a matter of telling people what to do when and more a matter of being effectively catalytic, evocative, inspirational and facilitative — helping existing potential energy, wisdom and collaboration find creative expression for community benefit.[9]

In fact, there are already many recent and well-documented cases of these kinds of approaches being enacted in communities, cities and even nations around the world, with inspiring results. The UK in particular appears to be a leader in engaging local communities in active, creative co-governance and shared responsibility for economic development. The nation’s Department of Communities and Local Government proclaims its mission as: “Strengthening local democracy by giving citizens a much bigger role in shaping the places in which they live and the public services they use.”[10]

At the community level, the UK has encouraged the development of a network of Local Strategic Partnerships, which are supported by national government funding but are completely self-organizing and self-determining.[11] In a report entitled Building Successful Cities, the Conference Board of Canada lauds the UK’s example, noting that “most cities in the U.K. have improved their economic performance dramatically in the past decade.”[12]

Non-profit organizations that support such community-wide collaborative efforts include Imagine Chicago, the Asset-Based Community Development Institute, AmericaSpeaks, the International Association for Public Participation (IAP2), the Human City Institute, the National Coalition for Dialogue and Deliberation, and the Institute of Community Cohesion.

Among these, Imagine Chicago is a particularly inspiring example. In true living systems form, what started as a community development initiative in one city grew into a self-organizing movement encompassing over seventy Imagine projects in more than twenty countries on six continents. Described as a set of “tools and practices for liberating imagination, improving communications and helping communities listen for and organize collective visions and actions,” the movement is built around Appreciative Inquiry, a highly engaging process that identifies and builds on a community’s strengths. According to founder Bliss Browne, this gives it quite a new perspective:

[The Imagine movement] has worked to … encourag[e] and challeng[e] people and institutions to understand, imagine and create the future they value, to move from understanding and dreaming community to building it. This is “mothering” work in the way Sara Ruddick describes it in her wonderful book Maternal Thinking where she suggests that motherhood is a sustained response to the promise embedded in the creation of new life. That for me is the challenge: How do we bring worthy collective dreams to birth and honor the new life they represent by creating the structures to sustain life’s promise on a long-term basis?[13]

“I like to think of community as something of a garden,” Browne continues. “In order to make it work one has to have a keen sense of the interdependence of things. And if one wants to be an active player in community, then one also has to be aware of the ecology of things.”[14]

Notice the decidedly life-centered concepts she evokes: mothering, gardening, ecology. This is a substantial shift from viewing an economy as a machine. Note also that economic development is not treated separately from community development; they necessarily go hand in hand.

What each of these approaches reflects is a trend toward the increasing cohesion, identity and self-organization of local communities. Though at first glance this rise in community power and identity might appear to be increasing fragmentation, in fact it is a beautiful example of the rich pattern of life: individual communities (parts) are increasing in their internal convergence, enabling them to contribute enhanced divergence to the surrounding whole (the living national and global economies). Rising transcendent creation is sure to follow. What a welcome relief that will be from what my husband calls “The United States of Generica.”

Conclusion

As we have seen throughout the first part of this book, the strength and vitality of any living system is a function of its capability to interact continuously and responsively with its context, to integrate divergent contributions from its contingent parts, and in these ways to adapt, evolve and innovate. With this in mind, we can now recognize that the strength of any economy is not its physical resources or measurable output, but its fertility… its resilience… its cohesion… its thrivability.

A Selection of Proposed Measures of Progress and Well-Being

The Index of Sustainable Economic Welfare and the Genuine Progress Indicator are similar instruments used in different countries around the world. Both are based on the GDP but subtract costs that detract from social well-being (crime, pollution, commuting, family breakdown, income inequality) and add the value of positive but unpaid activities (i.e., parenting, volunteering).

The Sustainable National Income is an alternative to GDP that calculates “the maximum attainable production level whereby, with the available technology in the year of calculation, vital environmental functions remain available ‘for ever’.”

The Canadian Index of Wellbeing measures eight factors: living standards, healthy populations, community vitality, education, environment (ecosystem health), time use, civic engagement, and arts, culture and recreation. It also reveals how each of these is inter-related.

The United Nations’ System of Integrated Environmental and Economic Accounting adjusts the System of National Accounts (Europe’s version of GDP) for changes in the quality of the environment and depletion of natural resources.

The United Nation’s Development Program has created the Human Development Index. Measured annually since 1990, it covers “poverty gaps [and] relative budget priorities between military spending and education, health, gender, environment and other aspects of government performance in over 180 countries.”

In 1995, the World Bank released a Wealth Index, attributing 20% of a nation’s wealth to its environmental assets, 60% to its human and social capital, and 20% to human-built capital like factories and financial assets.

Hazel Henderson has co-created the Calvert-Henderson Quality of Life Indicators, a quarterly compilation of multidisciplinary statistics covering twelve non-monetary aspects of well-being and progress: Education, Employment, Energy, Environment, Health, Human Rights, Infrastructure, Income, National Security, Public Safety, Re-creation, and Shelter.

The New Economics Foundation publishes a Happy Planet Index, assessing both the ecological footprint and the level to which people are able to live long, fulfilling lives. It is described as “a measure of the environmental efficiency of supporting well-being in a given country.”[15]

The Legatum Institute publishes an annual Prosperity Report, which encompasses both material wealth and life satisfaction. What is notable about this indicator is that it measures not outcomes but a nation’s intrinsic ability and efforts to generate wealth and happiness. On the other hand, it has little reference to environmental or social costs.

Developed at the initiative of the European Commission, the European Innovation Scoreboard measures a nation’s innovation rate and the structural conditions needed to support additional innovation.

The tiny Buddhist nation of Bhutan measures Gross National Happiness, the four components of which are “the promotion of sustainable development, preservation and promotion of cultural values, conservation of the natural environment, and establishment of good governance.” In 2007, an international conference on the topic drew 800 participants.

REFERENCES

[1] http://216.239.39.100/search?q=cache:Fo8VjgxCtB8C:www.phil.frb.org/files/br/brja00ln.pdf+New+Economy+economics&hl=en&ie=UTF-8

[2] Turning the Sword, Milenko Matanovic, Pomegranate Center, in YES! Magazine, summer 2002.

[3] http://www.lightparty.com/Visionary/LivingSystems.html

[4] Gunderson, Lance and C. S. Holding. Panarchy: Understanding Transformations in Human and Natural Systems. Washington: Island Press, 2002.

[5] http://www.hazelhenderson.com/editorials/mappingTheTransitionFromGDP08-01.html, accessed August 1, 2012.

[6] From a presentation given by Dani Rodrik at the London School of Economics entitled “Capitalism 3.0” on June 16, 2009.

[7] “Most red tape ever: $9 trillion over next decade,” by Jim Kuhnhenn, Associated Press, August 25, 2009.

[8] http://co-intelligence.org/PublicParticipationExpand.html, accessed August 1, 2012.

[9] http://co-intelligence.org/PublicParticipationExpand.html, accessed August 1, 2012.

[10] Strong and Prosperous Communities — The Local Government White Paper Implementation Plan: One Year On, published November 1, 2007, by the UK Department for Communities and Local Government, p. 3.

[11] Guidance on the duty to promote community cohesion, published by the Department for Children, Schools and Families, 2007. http://publications.teachernet.gov.uk/eOrderingDownload/DCSF-00598-2007.pdf

[12] Marni Cappe and Anne Golden, “Building Successful Cities: Lessons from the United Kingdom,” The Conference Board of Canada, The Canada Project Briefing, October 2006, p. 10.

[13] http://www.imaginechicago.org/how.html, accessed August 1, 2012.

[14] http://dreamvancouver.ca/?q=node/40, accessed August 1, 2012.

[15] http://en.wikipedia.org/wiki/Happy_Planet_Indexhttp://en.wikipedia.org/wiki/Happy_Planet_Index, referenced July 23, 2009.