This week the Commerce Department will take a first step toward accounting for environmental “goods” in terms economists understand best: money. The newest Survey of Current Business will include estimates of the nation’s mineral resources, such as coal and oil, translated into dollars and cents. Next on the list are “renewables” such as timber and fish, says Carol Carson, director of Commerce’s Bureau of Economic Analysis. The nickname for the project is “green GDP,” but the numbers will only supplement GDP, not replace it.
As currently figured, GDP includes only what’s bought and sold in the market. tree would be counted on its way to becoming a bat sold at Kmart, but the loss of the tree as a national resource would never be recorded. Under the new approach, the nation will calculate its economic health more like a company does. General Motors doesn’t just keep track of the number of cars it sells but what it gains and loses in the process of making them. A new robot goes in the plus column: the declining value of an old factory goes in the minus column. Commerce figures, too, will show the price of production: what we use up.
For critics of the GDP, this change is long overdue. “This is of great potential importance,” says economist Robert Eisner, author of “The Misunderstood Economy: What Counts and How to Count It.” Eisner has argued for years that narrowly conceived statistics distort our view of reality and, as a result, our policies. He and others would like to see green GDP followed by a host of other adjustments that would take account of economic activity-from changing a diaper to taking time off from work-that isn’t “valued” in the market.
But others see Commerce’s innovation as misguided, even suspect. “These numbers are entirely subjective,” scoffs Daniel Mitchell, an economist at the Heritage Foundation, and will simply be “ammunition” for “anti-growth” environmentalists. Re-evaluating GDP is worthwhile, he said, but the debate should stay in the academic, not the political, arena.
In fact, the effort has been stalled in academia for decades. The United States began tracking GNP in the 1940s, using systems developed solely to measure industrial production. But over time, GNP became a de facto proxy for “economic progress,” says Robert Repetto of the World Resources Institute.
Of course, there is logic to an approach that uses only what’s in the market. It’s simpler to count, say, GM’s $3 million investment in a new plant than to assign a value to untapped oil, let alone the “depreciation” of a polluted river. The BEA’s Carson expects argument on the changes. “We’re setting out our sources and methods, so people can criticize,” she says. “But we believe it’s doable.” Doable or not, the debate is joined. From now on, when a tree falls, someone will be listening.
