Gross Domestic Product (GDP) is becoming widely recognized as an insufficient measure of economic progress and national “success.” Since GDP is nearly universally available and comparable across countries, it is extensively used as a benchmarking and reference statistic even for purposes for which it was not designed. GDP measures the level of domestic productive activity, but it ignores the costs of this growth in terms of, for example, environmental degradation that occurs in the process of production. Sir Partha Dasgupta likened this to a soccer team that only measures success as goals for and ignores goals against.
Whether economic progress is sustainable can be measured by how real wealth per capita is changing, as this represents changes in the potential for future growth. Wealth, in this context, encompasses the value of all the assets of a nation that support economic production, such as its factories and roads (produced capital), forests, fish stocks, and fossil fuel reserves (natural capital), labor force (human capital), and net foreign assets (see Figure 1). As long as real wealth per capita does not decline, future generations will have at least the same opportunities as the current generation, suggesting that development may be sustainable.