Time to replace the GDP with a measure that accounts for natural resources


Nation needs new economic yardstick


Most economists will tell you that problems in the subprime housing market caused the Great Recession.

Six years after the end of the downturn, it’s still the conventional wisdom. Mainstream economists remain focused on strategies to improve capital, labor and technology in hopes of preventing another meltdown.

We think their view is too narrow. The Great Recession was a resource depletion problem masquerading as a financial crisis. Even worse, it could be just the start of our troubles.

The Age of Resource Depletion has dawned, and it could be our undoing if we don’t get our arms around it soon.

In the case of the Great Recession, the depleted resource was oil as demand increased and production flatlined. As a result, the average gas price spiked to more than $4 a gallon in 2008, and homeowners in far-flung suburbs across the country faced difficult spending choices. Many chose to put food on the table and gas in their tanks instead of paying their too-large mortgages.

The crisis made it painfully clear that the world’s economic and environmental fates have become forever interconnected.


The natural resources that fueled unprecedented growth in developed countries once seemed unlimited. But no longer. We can clear-cut only so many forests, pump only so much oil out of the ground and drain only so much water out of aquifers before our behavior becomes unsustainable.

Further, the environment can handle only so much waste, whether it’s harmful emissions in the air or contaminants in the wetlands.

It’s high time we change the way we think about the economy. We need a new framework that takes into account the biosphere’s limits. It’s time to go beyond GDP.

GDP – or gross domestic product – measures a nation’s flow of income, but it’s a flawed yardstick and leads to some perverse accounting.

Think back to last year when agricultural runoff caused toxic algal blooms in Lake Erie. Did you know that GDP grew, thanks to spending on bottled water and the goods and services needed to repair the damage?

Looking at the economy in this narrow way would suggest that polluting one of our Great Lakes benefits our economic health

Of course, no one wants to tarnish a national treasure. The point is that when we become singularly focused on growing GDP, we’re left with no incentive to sustainably manage our natural resources.

In doing so, we’re killing the goose that lays the golden egg in pursuit of short-term growth. What we use today is gone forever, making the problem worse and leaving it for our children to solve.

There is another way.

In our new book “Beyond GDP: National Accounting in the Age of Resource Depletion,” we suggest several steps that ought to be taken to create a more comprehensive system of national accounting. The system ought to track resources that flow into the economy and wastes that flow back to the biosphere.

We can start by changing the metaphor we use to describe economy. Many of us think of the economy as an “engine” that can stall, but it’s an outdated metaphor. To describe our new reality, we ought to think of the economy as a metabolism.

In your body, your metabolism is the set of chemical reactions that maintain life. Energy and materials are taken into the body, transformed internally and discharged into the environment. An organism that acquires less energy than it consumes is doomed.

We need to know how and at what rate we are using natural resources if we are to transition to a sustainable global economy. Using the metabolism metaphor, we ought to develop a new system of national accounting that includes raw materials flowing into the economy, burning of fossil fuels for energy and disposal of waste wherever possible.

We fully expect political hurdles.

In the early 1990s, the U.S. Bureau of Economic Analysis began a program called the Integrated Environmental-Economic System of Accounts. Congress expressly forbade the collection of such data in 1994.

Meanwhile, the Organisation for Economic Co-operation and Development and even emerging economies have moved ahead without the United States. Economic-environment accounts are now common outside U.S. borders.

The Bureau of Economic Analysis ought to seek authorization to restart its program.

If we as a society can begin collecting relevant data, perhaps we can begin to use the analytical tools, metrics and knowledge to go beyond GDP and make wise choices for the future. Our deepest hope is to make a positive contribution in that direction.


Matthew Heun is a professor of mechanical engineering at Calvin College. Michael Carbajales-Dale is an assistant professor of environmental engineering and Earth sciences at Clemson University. Becky Roselius Haney is an assistant economics professor at Calvin College.


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