The Index of Sustainable Economic Welfare is an economic indicator intended to replace the Gross domestic product. Rather than simply adding together all expenditure like Gross domestic product. Consumer expenditure is balanced by such factors as income distribution and cost associated with pollution and other economically unsustaining costs. It is similar to the Genuine Progress Indicator.

Definition

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Index of Sustainable Economic Welfare (ISEW) is roughly defined by the following formula.

ISEW = personal consumption
+ non-defensive public expenditures
- defensive private expenditures
+ capital formation
+ services from domestic labour
- costs of environmental degradation
- depreciation of natural capita

History

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The index is based on the ideas presented by Nordhaus and Tobin in their Measure of Economic Welfare. It was first coined in 1989 by Daly and Cobb. They later went on to add several other "costs" to the definition of ISEW. This later work formed the Genuine Progress Indicator.

References

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• Nordhaus, W. and J. Tobin, 1972. Is growth obsolete?. Columbia University Press, New York.
• Daly,H. & Cobb, J., 1989. For the Common Good. Beacon Press, Boston.

External links

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• Friends of the Earth: Measuring progress

Socioeconomics

Index of Sustainable Economic Welfare | ISEW