Genuine Progress Indicators (GPI)

© Mark Anielski 2006

Genuine Progress Indicators (GPI):Measuring the Impacts of Gambling on Well-being

Alberta Gambling ConferenceApril 21, 2006


A society must be self-aware. Any culture that jettisons the values that have given it competence, adaptability,

and identity becomes weak and hollow.

Jane Jacobs, Dark Age Ahead


Where is the life we have lost in living? Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?

T.S. Elliott (1954). 'Choruses from the rock'


An economy is a wholly-owned subsidiary of the ecosystem

Ecosystem

Market Economy

Community


Sustainability is the possibility that human and other forms of life can flourish on the earth forever

John Ehrenfeld, MIT


What is the good life?

The maximand is life, measured in cumulative person-years ever to be lived by all species at a standard of resource use

sufficient for the good life.--- Herman Daly, 1996


The lost language of economics

Value(Latin:valorum)

To be worthy

Wealth(Old English)

The conditions of well-being

Competition(Latin:competere)

To strive together

capitalWealth, in whatever form, used or capable of being used to produce

more wealth.*


Economics = oikonomiathe study of the well-being and stewardship of the household, habitat or natural environment

Channel Rock, Bainbridge Graduate Institute, Cortes Island, B.C.


La economia es de gente, no de curvas!" ("Economics is about people, not curves.")


Financial management = chrematisticsthe study of wealth or a particular theory of wealth as measured by money.


Building an Economy of Well-being


WealthGenuineTo be authentic; true to one’s values, virtues or principles.

The conditions of well being.

Copyright © Mark Anielski


Genuine Wealth assessment: a

new kind of bean counting

What do we mean by well-being?

It is more than happiness and satisfaction – it also includes developing as a person, being

fulfilled, and contributing to society.Being happy is seriously good for you and others.

Happy and fulfilled people live up to seven years longer, have stronger social networks and are more engaged in their communities.

Source: A Well-being Manifesto for a Flourishing Society. New Economics Foundation, UK. 2004


What do key determinants of well-being?

50% Our parents, through our genes and upbringing40% Our activities and outlook –friendships, being involved in our community, sport and hobbies as well as our attitude to life.10% Our circumstances, income, where we live, climate.




Towards a flourishing economy of well-being

A well-being manifesto for a flourishing societyA flourishing society needs vibrant, resilient and sustainable communities.

The manifesto raises some big questions:Can we become a flourishing society that is companionable, sustainable and has time to enjoy the fruits of our economic

prosperity?What do we mean by well-being?

It is more than happiness and satisfaction Š it also includes developing as a person, being fulfilled, and contributing tosociety.

Being happy is seriously good for you and others. Happy and fulfilled people live up to seven years longer, have strongersocial networks and are more engaged in their communities.

Why is well-being important to politics?As well as having massive positive impacts on health, high levels of well-being and will also lead to a more

entrepreneurial society and greater active citizenship.Three major influences on our well-being are:

• Our parents, through our genes and upbringing influence about 50 per cent of our well-being• Our circumstances, which include our income, where we live, the climate and other external factors, account for only

10 per cent.• Our activities and outlook Š like our friendships, being involved in our community, sport and hobbies as well as our

attitude to life Š account for the remaining 40 per cent.


The ends-means spectrum

Ultimate Ends (final cause, happiness, enlightenment, God)

Intermediate Ends (health, safety, comfort)

Intermediate Means(artifacts: labor, tools, factories, processed raw materials)

Ultimate Means(material cause, low entropy, matte-energy)

Religion, philosophy

Ethics

Economics,politics

Physics

Technics

© Mark Anielski 2006Daly, Herman and Joshua Farley.2004.Ecological Economic:Principles and Applications and Daly, Herman. 1973. TSteady-State Economy. San Francisco: W. H. Freeman and Company, 1973, p. 8

BuildingsEquipmentInformationInfrastructure

Human-made Material

SkillsHealthAbilitiesEducation

FamilyNeighboursCommunityCompaniesGovernment

People Connections


FoodWaterMetalsWoodEnergy

Natural Resources Ecosystem Services Beauty of Nature

FisheriesFertile soilWater filtrationCO2 > Oxygen

MountainsSeashoresSunlightRainbowsBird songs

NaturalCapital

BuiltCapital

Human and SocialCapital

Source: Hart, Maureen (1999). Guide to Sustainable Community Indicators

© Mark Anielski 2006The Fulfillment Curve

ENOUGHENOUGH

Survival

Money Spent

Comfort

Luxuries

Fulfi

l lmen

t

More Luxuries

How much is enough? The Value of Sufficiency and Moderation

Needs vs. WantsThe desirable ends

• How do we provide a high quality of life for this and future generations?

• Consumption is only one narrow component of human needs

Source: Joshua Farley (Gund Institute for Sustainability)© Mark Anielski 2006


The Genuine Progress Indicator

Why Measure Genuine Wealth?


“Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things.

The Gross National Product [GNP] includes air pollution and advertising for cigarettes, and ambulance to clear our highways of carnage.

It counts special locks for our doors, and jails for the people who break them. GNP includes the destruction of the redwoods and the death of Lake Superior. It grows with the production of napalm and missiles and nuclear warheads. And if GNP includes all this, there is much that it does not comprehend.

It does not allow for the health of our families, the quality of their education, or the joy of their play. It is indifferent to the decency of our factories and the safety of our streets alike. It does not include the beauty of our poetry or the strength of our marriages, or the intelligence of our public debate or the integrity of our public officials.

GNP measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country.

It [GNP] measures everything, in short, except that which makes life worthwhile.”

Robert F. KennedyMarch 18, 1968

The GDP Hero

The GDP hero is a daily gambler, chain-smoking, terminal cancer patient going through an expensive divorce whose car

is totaled in a 20-car pileup.


The GDP is like a calculator that only knows how to add.


The errors of national income accounting and the GDP

• GDP adds up all money transactions without accounting for costs.• GDP takes no account of the inequality of income, wealth and spending power.• GDP treats crime, imprisonment, divorce, problem gambling, and other forms of family and social breakdown as economic gain yet the value of housework, parenting and volunteering count for nothing.• GDP increases with each environmental calamity, each polluting activity and then again in repairing the damage.• GDP does not account of the depletion or degradation or natural resources and the environment.• GDP treats war expenditures as economic gain both during the destruction and the rebuilding phases.• GDP ignores the liabilities of living on debt and foreign borrowing.


“The welfare of a nation can scarcely be inferred

from a measurement of national income as defined by the GDP…goals for ‘more’ growth should specify of what

and for what”

Simon Küznets, architect of the GNP, 1962


The Genuine Progress Indicator (GPI) is a new measure of economic well-being that

corrects the accounting errors inherent in the system of

national accounts from which the GDP is derived.


Components of the Genuine Progress Indicator….24

adjustments to GDP


• starts with personal/household consumption expenditures• adjusted for income distribution…the gap between rich and poor• adds the value of housework and parenting and the value of volunteerwork• adds the value of the service from household infrastructure• adds the value of the service from streets and highways• subtracts the value of time including the cost of lost leisure time, family breakdown, commuting time, and underemployment• subtracts the cost of crime, auto accidents, cost of consumer durables (and the costs of problem gambling: Australia/Alberta).• subtracts the cost of long-term environmental degradation, air pollution, water pollution, ozone depletion, air pollution, noise pollution, loss of farmland, loss of forests, loss of wetlands• adjusts for net capital formation and net foreign borrowing

Conventional Economic Growth modelvs. Genuine Progress Indicator

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995

U.S. GDP per capita

U.S. GPI per capita

US

$ pe

r cap

ita, 1

992

chai

ned

dolla

rs

© Mark Anielski 2006Source: Data derived from spreadsheets from the U.S. Genuine Progress Indicator (GPI) for 1999. Redefining Progress, Oakland, CA. www.rprogress.org


Canada's GPI vs. GDP per capita1971-1994

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

cons

tant

198

6 do

llars

Per Capita GPI Cdn. $ 1986 constant Per Capita GDP Cdn. $ 1986 constant

GDP per capita

GPI per capita

S S i i C d

Source: Messinger and Tarasosfky (1997)

Canada GDP vs. GPI


-

20

40

60

80

100

120

140

160

180

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995

Inde

x (1

970=

100)

US GDP per capita

US GPI per capita

Index for Social Health

US Ecological Footprint deficit

Living Planet Index (Global)

Better

Worse

Sources: 1. US GDP: U.S. Bureau of Economic Analysis 2. U.S. GPI: Redefining Progress (www.rprogress.org. 3. Index for Social Health: Miringoff (found in Zeesman and Brink (1997)). 4. UN HDI: U.N. Human Development Report 1999 5. U.S. Ecological Footprint: derived from source: Wackernagel & Rees, "Our Ecological Footprint" and www.rprogress.org. 6. Living Planet Index: World Wildlife Fund.

GDP Rises as Life Capital Indicators Decline


Genuine Wealth Assessment (GWA)

A tool for communities and enterprises to identify, measure, and manage their genuine wealth (well-being): the human, social, natural, manufactured and financial capital assets that contributes to a sustainable and flourishing economy of well-being.

The Genuine Progress Wealth Accounting System


1. Values audit2. Wellbeing Accounts and Indicators3. GW Balance Sheet

• Living capital = human, social, and natural + produced and financial capital

• assets = liabilities + equity4. GW Net Sustainable Income Statement

• Full cost (benefit) accounting of social, human and environmental capital depreciation (appreciation).

5. Genuine Well-being Report

Genuine Wealth sustainabilitymeasurement and management system

Values

EnvironmentalEnvironmentalAccountingAccounting

FinancialAccounting

SocialAccounting

SocialCapital

NaturalCapital

ManufacturedCapital

FinancialCapital

HumanCapital

GPA Total Wealth Accounts GPA Sustainable Income Statement

GPA Total WealthBalance Sheet

Full Cost Accounting for the“Sustainable Bottom Line”

Genuine Progress Indicators:Physical, qualitative and monetary indicators of the conditions of genuine wealth.

Community WellCommunity Well--being being ReportReport

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

NaturalCapital

0

10

20

30

40

50

60

70

80

90

100

FinancialCapital

0

10

20

30

40

50

60

70

80

HumanCapital

0

10

20

30

40

50

60

70

80

90

100

ManufacturedCapital

The NewGPA IntegratedBalance Sheet

0

10

20

30

40

50

60

70

80

SocialCapital

Revenues- Operating Expenses- Full Environmental, Social

and Human Costs of Operations

- Depreciation Costs of Five Capital Assets

- Human Capital- Social Capital- Natural Capital- Manufactured Capital- Financial Capital

= Sustainable Income (Social, Environmental, Economic Profits)

NeedsWants

Genuine Well-being Index

EndsMeans

Accounting &Assessment Tools



Social Capital Themes

Produced Capital Themes

GenuineProgressIndicators

Natural CapitalThemes

Sustainable Income Statement (Total Cost-Benefit Assessment)

Community Capital Accounts

Stocks Flows

HumanCapital

Accounts

SocialCohesionAccounts

Human-madeCapital

Accounts

Financial Capital

Accounts

Natural ResourceAccounts

EcosystemServicesAccounts

Monetary(Costs-Benefits)

Total Capital Balance Sheet(Assets-Liabilities-Equity)

Quantitative

Qualitative

Monetary

Sustainability Indicators

Alberta GPI Sustainable Well-being Accounting System


The Alberta GPI Accounts: 51 Elements of Well-beingSocietalSocietal

WellWell--BeingBeingAccountAccount

EconomicEconomicWellWell--BeingBeing

AccountAccount

EnvironmentalEnvironmentalWellWell--BeingBeing

AccountAccount

•Economic Growth•Economic Diversity•Trade•Disposable Income•Personal Expenditures•Taxes•Debt•Savings Rate•Household infrastructure•Public Infrastructure•Income inequality

•Poverty•Paid work time•Unemployment•Underemployment•Parenting and Eldercare•Leisure time•Volunteerism•Commuting time•Family Breakdown•Crime•Democracy•Intellectual Capital•Life Expectancy•Infant mortality•Premature mortality•Disease•Obesity•Suicide•Substance Abuse•Auto Crashes•Gambling

•Ecological Footprint•Ecosystem Health•Carbon Budget•Energy Efficiency•Oil and Gas Reserve Life•Agriculture Sustainability• Timber Sustainability•Wetlands-Peatlands•Fish & Wildlife•Air Quality•Water Quality•Toxic Waste•Landfill Waste

GPI

Bal

ance

She

et

The GPA Net Sustainable Economic Welfare


Gross Domestic Product (GDP)Personal consumption expendituresadjusted for: Income inequalityADD:+ Value of unpaid work (housework, parenting, volunteerism)+ Value of services from household and public infrastructureDEDUCT:Cost of household debt servicingCost of net foreign borrowingHuman and social capital depreciation:

- loss of leisure time- cost of underemployment and unemployment- cost of divorce, suicide, auto crashes, gambling, commuting

Natural capital depreciation: - nonrenewable natural capital (minerals, oil, gas, coal)- unsustainable renewable resource use (forests, agriculture)

Value of loss of ecosystem services: - carbon sequestration, air pollution,water pollution, forests, wetlands

= Net Sustainable Economic Welfare ($ GPI)

GPI

Inco

me

Stat

emen

t

Source: Anielski et. al. 2001


What Albertans ValuesWhat Albertans Value Most (1997)

26%

21%

15%

11%

11%

11%

10%

9%

9%

8%

8%

7%

6%

6%

0% 5% 10% 15% 20% 25% 30%

Nature

No provincial sales tax

Unpolluted air

Less crime

Friendly people

Freedom

Jobs available

Health care- good system

Not overpopulated

Healthy economy

Lower cost of living

Quality education

Leisure opportunities

No natural disasters

Source: Alberta Growth Summit, 1997, survey of what Albertans value most


What matters to Canadians#1. Democratic rights and participation#2. Health#3. Education#4. The Environment#5. Social conditions and programs#6. Community#7. Personal well-being#8. Economy and employment#9. Government

Source: “Quality of Life in Canada: A Citizens’ Report Card”Canadian Policy Research Networks


GPI Economic Well-being Account

EconomicEconomicWellWell--beingbeing

AccountAccount

GDP (+ 126%)*Economic diversity (- 62%, 1972) Trade balance Disposable income (+113%)Real weekly wages (+61%)Personal expenditures (+110%)Transportation exp. (+285%)Taxes (+ 494%)Personal debt (+307%)Savings RateHousehold infrastructure (+125%)Public Infrastructure (+25%)

-

1 0 .0 0

2 0 .0 0

3 0 .0 0

4 0 .0 0

5 0 .0 0

6 0 .0 0

7 0 .0 0

8 0 .0 0

9 0 .0 0

1 0 0 .0 0

Ec o n o m ic G r o w t h

Ec o n o m ic D iv e r s it y

Tr a d e

D is p o s a b le In c o m e

Ex p e n d it u r e s

Ta x e s

D e b t

S a v in g s R a t eEm p lo y m e n t Q u a lit y

U n e m p lo y e m n t

U n d e r e m p lo y m e n t

P o v e r t y

n c o m e in e q u a lit y

H o u s e h o ld in f r a s t r u c t u r e

P u b lic In f r a s t r u c t u r e

Good Health (Endowments)Moderate Health (Caution)Poor Health (Liabilities)

* % change from base year 1961


GPI Societal Well-being Account

Personal Personal and Societaland SocietalWellWell--beingbeing

AccountAccount

Time Use• Paid work time • Unemployment• Underemployment• Housework• Parenting and Eldercare• Leisure time• Volunteerism• Commuting time

Social Cohesion• Divorce/Family

Breakdown• Crime• Democracy• Poverty• Inequality

Intellectual Capital

• Educational attainment

Health and Wellness

•Life Expectancy

•Infant mortality

•Premature mortality

•Disease

•Obesity

•Suicide

•Substance Abuse

•Auto Crashes

•Gambling

-102030405060708090

100Poverty

Income distribution

Unemployment

Underemployment

Paid work time

Household work

Parenting and eldercare

Free time

Volunteerism

Commuting time

Life expectancyPremature mortality

Infant mortality

Obesity

Suicide

Drug use (youth)

Auto crashes

ly breakdown

Crime

Problem gambling

Voter participation

Educational attainment

Time UsePaid work, hours paid work per labor force participant (- 48%*)Housework (+8%)Parenting and eldercare (-31%)Leisure time (+19%)Volunteerism (+12%)Commuting (+4.2%)

Unemployment (+128%)Underemployment (+525%)

Good Health (Endowments)Moderate Health (Caution)Poor Health (Liabilities)


Health and Wellness

Life expectancy (+10%)Premature mortality (-37%)Infant mortality (-71%, 1971)Obesity (+135%, 1985)Suicide (+30%)Youth drug abuse (+33%, 1971)Auto crashes (+47%)Problem Gambling (+1637%, 1971)

Moderate Health (Caution)Poor Health (Liabilities)

Good Health (Endowments)


Social Capital

Divorce/Family Breakdown (+312%)Crime (+59%)Democracy (-9%)Poverty (+37%)Income gap between rich and poor (+63%, 1980)

Intellectual Capital

Educational Attainment (+1693%)





Environmental Health and Well-being Accounts

Environmental Environmental WellWell--beingbeing

AccountAccount

Ecological Footprint (+66%)Ecosystem integrity (-89%)

Carbon budget deficit (+609%)Greenhouse gas emissions (+211%)Energy use (+123%)

Oil and gas reserve life (-78%)Oilsands reserve life (-21%)Agriculture sustainability (+38%)

Timber sustainability (-78%)Wetlands-peatlands (-20%)Fish & wildlife (-26%)

Air quality index (+26%)Water quality index (+46%)

Hazardous waste (+180%)Household waste (-28%)

-102030405060708090

100Oil and gas reserve life

Oilsands reserve life

Energy use

Agricultural sustainability

Timber sustainability

Forest fragmentation

Parks and wilderness

Fish and wildlife

Wetlands Peatlands

Water quality

Air quality

GHG emissions

Carbon budget deficit

Hazardous waste

Landfill waste

Ecological footprint



Alberta Genuine Progress Indexcirca 1999

Source: Anielski, M, M. Griffiths, D. Pollock, A. Taylor, J. Wilson, S. Wilson. 2001. Alberta Sustainability Trends 2000: Genuine Progress Indicators Report 1961 to 1999. Pembina Institute for Appropriate Development. http://www.pembina.org/green/gpi/ April 2001.

http://www.pembina.org/green/gpi/


The Genuine Progress Index (51-indicators)versus GDP


0.75

0.95

1.15

1.35

1.55

1.75

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

Inde

x, 1

971=

1.00

GDP Index

Genuine Progress Index

Between 1961 and 1999 Alberta GDP per capita rose 2.4% per annum while the GPI fell from 1961 to 1987 and remained stagnant through the 90s.


If Alberta’s GDP is up, what about household, social and environmental well-being?


0.65

0.85

1.05

1.25

1.45

1.65

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

Inde

x, 1

971=

1.00

GDP Index

GPI Economic Index

GPI Social Index

GPI Environmental Index


As GDP rose, real disposable incomes stagnated

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1961 1966 1971 1976 1981 1986 1991 1996

GD

P P

er C

apita

($19

98)

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Per

sona

l Dis

posa

ble

Inco

me

Per

Cap

ita ($

1998

)

Economic growth

Disposable income

Despite increasing economic growth since

1981, average real disposable incomes have stagnated since

peaking in 1981.

In a 1999 national survey, 23% of Albertans (highest in Canada) said they would not

have enough savings to sustain themselves beyond

one month’s salary. (Council on Social Development)

Source: The Alberta GPI Accounts 1961 to 1999


Albertan’s share of GDP falling


The Average Albertan's Share of GDP

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

Rea

l dis

posa

ble

inco

me

per c

apita

as

a sh

are

(%) o

f rea

l GD

P pe

r cap

ita

1971 lowest point = 53.7%

1998 2nd lowest point = 53.9%

1981 peak = 78.5%

A rising GDP tide is not raising

all household

boats equally

Albertan’s living on debt


(200)

4,800

9,800

14,800

19,800

24,800

1960 1965 1970 1975 1980 1985 1990 1995

1998

dol

lars

per

Alb

erta

n

Taxes on persons

Sources: Alberta Treasury, Alberta Economic Accounts 1999; Statistics Canada, CANSIM Table 384-0035 and Table 384-0012 (92-99)

Savings

Personal and household debt

Disposable income

Personal consumptionexpenditures

1999

Pembina Institute

© Mark Anielski 2006-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1961 1966 1971 1976 1981 1986 1991 1996

GD

P P

er C

apita

($19

98)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

110.0%

Deb

t as

% o

f dis

posa

ble

inco

me

Economic growth

Total debt as % ofdisposable income

Household per capita debt has reached 105% of disposable income


Debt servicing costs as a % of real disposable income have

doubled from 4.7% in 1961 to 10.8% in 1999.

105%

55%


Poverty

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1961 1966 1971 1976 1981 1986 1991 1996

GD

P Pe

r Cap

ita ($

1998

)

-

5

10

15

20

25

30

Pov

erty

(% o

f all

pers

ons

livin

g be

low

the

low

inco

me

cut-o

ff)

Economic Growth

Poverty

Between 1961 and 1999, the level of poverty (LICO)

increased 37.1%); Alberta had Canada’s

third lowest poverty rate

Roughly 20% of Albertans used the provinces 74 foodbanks

An estimated 17.2% of Alberta households are living at or below a living wage ($24,332 per annum for

family of four).



Employment• Hours of paid work:

2,821 per worker per year• Unemployment rate: 2.5%• Underemployment rate: 0.55%

Income and Spending(1998$ per year per Albertan)• Disposable income: $9,466• Personal consumption expenditures: $8,747• Taxes: $870• Household debt: $5,204• Savings rate: 3.7%

Where does the time go?(hours per Albertan per year)• Paid work (per person in work force): 2,821• Commuting time (minutes per day): 24.0• Household work: 957• Parenting and eldercare: 198• Free time: 1,829• Volunteering: 68

Where did the money go in 1961?(spending in 1998 dollars per Albertan)• Housing and utilities: $1,508• Food and tobacco: $2,173• Clothing: $772• Personal goods: $1,129• Household operations: $973• Recreation & entertainment: $562• Health care: $339• Transportation: $1,254• Taxes: $1,928• Household debt service costs: $75

The way Albertans lived in 1961…

The Household


Employment• Hours of paid work: 1,463 per worker per year• Unemployment rate: 5.7%• Underemployment rate: 3.45%

Income and Spending(1998$ per year per Albertan)• Disposable income: $19,762• Personal consumption expenditures: $17,112• Taxes: $4,099• Household debt: $21,172• Savings rate: 6.8%

Where does the time go?(hours per Albertan)• Paid work (per person in work force): 1,463• Commuting time (minutes per day): 25.0• Household work: 1,032• Parenting and eldercare: 137• Free time: 2,106• Volunteering: 75

Where did the money go in 1999?(spending in 1998 dollars per Albertan and % increase since 1961)o Housing and utilities: $3,869 (+256%)o Food and tobacco: $2,432 (+12%)o Clothing: $838 (+ 9%)o Personal goods: $3,654 (224%)o Household operations: $1,482 (+ 52%)o Recreation & entertainment: $2,029 (+ 261%)o Health care: $805 (+ 137%)o Games of chance (gambling) $309 (+%??)o Transportation: $3,330 (+166%)o Taxes: $5,172 (+ 494%)o Household debt servicing costs: $2,257 (+2905%)

…and the way we live in 1999

The Household


Family Breakdown: Divorce

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1961 1966 1971 1976 1981 1986 1991 1996

GD

P P

er C

apita

($19

98)

-5%

5%

15%

25%

35%

45%

55%

Fam

ily B

reak

dow

n (%

of m

arria

ges

that

end

in d

ivor

ce)

Economic growth

Family breakdown

Source: Statistics Canada, CANSIM special retrieval and Alberta Economic Accounts 1999

The estimated cost of divorce and familybreakdown in Alberta in 1999is estimated to contribute $148 million(1998$)to Alberta’s economic growth.

The rate of divorce rose 4.6% per annum

compared to real GDP growth of 4.4% per year, 1961 to 1999


Suicide

Suicide is the leading cause of death amongst Calgary males aged 10-

49 years.

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1961 1966 1971 1976 1981 1986 1991 1996

GD

P P

er C

apita

($19

98)

-

2

4

6

8

10

12

14

16

18

20

Sui

cide

(per

100

,000

peo

ple)

Economic growth

Suicide


Youth Drug Use


-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1961 1966 1971 1976 1981 1986 1991 1996

GD

P P

er C

apita

($19

98)

-

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Sub

stan

ce A

buse

Economic growth

Drug use (youth)



Problem Gambling


-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1961 1966 1971 1976 1981 1986 1991 1996

GD

P P

er C

apita

($19

98)

-

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

Gam

blin

g

Economic growth

Problem gambling


Alberta $ Genuine Progress Net Sustainable Economic Welfare, 1999

Alberta GPI Income Statement for 1999, 1998 $ millions1998$

millions % of GDPGross Domestic Product (expenditure-based) 109,708 Personal consumption expenditures 52,839 48.2% Consumption Expenditures adjusted for income distribution 47,957 43.7%

Non-defensive Government Expenditures 7,728 7.0%Value of Services of Consumer Durables 5,533 5.0%Value of Public Infrastructure Services 1,661 1.5%Net Capital Investment (865) -0.8%Cost of Household and Personal Debt Servicing (6,434) -5.9%Cost of foreign borrowing (31,920) -29.1%Value of Unpaid Work and LeisureValue of Housework 32,907 30.0%Value of Parenting and Elder Care 3,292 3.0%Value of Volunteer Work 2,631 2.4%Value of Free Time 0 0.0%

38,830 35.4%Social Capital Depreciation CostsCost of Consumer Durables (7,998) -7.3%Cost of Unemployment and Underemployment (3,824) -3.5%Cost of Auto Crashes (3,026) -2.8%Cost of Commuting (4,406) -4.0%Cost of Crime (1,833) -1.7%Cost of Family Breakdown (148) -0.1%Cost of Suicide (2) 0.0%Cost of Gambling (2,168) -2.0%

(23,406) -21.3%

Alberta $ Genuine Progress Net Sustainable Economic Welfare, 1999…cont.

Natural Capital Depreciation CostsCost of Nonrenewable Resource Use (10,656) -9.7%

Cost of non-timber forest values due to change in productive forest (24) 0.0%Cost of Unsustainable Timber Resource Use (loss in pulp production value) (15) 0.0%

Cost of erosion on bare soil on cultivated land (on-site only) (13) 0.0%

Cost of reduction in yields due to salinity on dryland and irrigated cropland (58) -0.1%Cost of air pollution (3,666) -3.3%Cost of GHG (climate change costs) (4,073) -3.7%Cost of Loss of Wetlands (7,682) -7.0%Environmental Cost of Human Wastewater Pollution (1) 0.0%Non- market Cost of Toxic Waste Liabilities (5) 0.0%Non-market Cost of Municipal waste Landfills (190) -0.2%

(26,382) -24.0%

$GPI (Net Sustainable Economic Welfare) 12,703


Alberta GDP vs. $ GPI1961-1999


Total environmental costs and natural capital depreciation is

estimated at $26.4 billion (1998$) or 24.0% of Alberta’s

GDP.

The value of unpaid work is estimated at $38.8 billion

(1998$) or 35.4% of Alberta’s GDP in 1999.

The social and human capital costs are estimated at $23.4 billion (1998$) or 21.3% of

Alberta’s GDP.

-$15,000

-$10,000

-$5,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

1998

$ p

er c

apita

Alberta GDP per capita

Alberta $ GPI per capita*

* based on U.S.-style GPI methods, includingcost of foreign borrowing


Alberta Gambling and GPI


Fundamental Questions1. Does gambling (playing games of chance)

contribute to a net improvement in the well-being (util-ity) of a household (oikos) and the community?

2. What are the positive and negative impacts, benefits and costs of gambling to the overall well-being of society?

3. How should we evaluate these impacts against whose values?


Fundamental Questions• If governments are utilitarian in their

policies and behaviour what onus is on government to be accountable for the changes in well-being (outcomes) of every household in a community?

• How can alternatives to gambling, as a policy for revenue generation, be assessed and weighed?


Flaws in Economic Analysis“There is a pervasive lack of understanding among legislators

and the business community -- even among the rank of economists -- about what economic development is and how to evaluate it…[and] little or no understanding on how to construct the

elements of cost-benefit analysis and how to validate its components once they have done so. ”

Earl GrinolsGambling in America: Costs and Benefits


Gambling analyzed through a GPI lens would..

examine and compare the total well-being impacts (both positive and negative) on the individual, the household and the community

as well as the full financial costs and benefits associated withplaying games of chance in the context of societal value for all

households.


GPI test would ..

Demonstrate the expected net well-being impact of any proposed gambling development and the actual net well-being impacts of

existing gambling industry development on individual households and the community.

The analysis should show that gambling activities either have a positive, negative or neutral impact on well-being; if gambling created more social harm and diminished well-being, even for

one household, then it would fail the GPI test.

Impacts can be both tangible, intangible and monetary in nature.


Alberta GPI Study (2001) of GamblingReport attempted to measure the full costs associated with gambling in terms of the estimated monetary losses of problem and pathological gamblers, who represented nearly five percent of Alberta’s adult population in 1999 (based on a similar GPI study for Australia by Clive Hamilton).

This report and the GPI accounting system attempt to measure these impacts in a more holistic way than GDP accounting. The incidence of gambling is used, with other indicators, as a proxyfor the health of communities and households. This report was a first step toward a more complete and holistic full impact analysis of gambling on household and societal well-being.


Benefits of Gambling for Alberta• The $864-million in net revenues to the Alberta Government in 1999-2000 helped to support over 8,000 not-for-profit, community and public initiatives. • Net revenues earned by charities from licensed gaming activitiestotaled $163-million in 1999-2000.• Gaming revenues were approximately four percent of 1999-2000 Government of Alberta revenues.• The industry provided 11,000 full and part-time jobs, according to a 1998 KPMG study estimate.


The Costs of GamblingThe Australian GPI estimates for the cost of gambling. Dr. CliveHamilton of the Australian Institute estimated the GPI for Australia for 1999 and estimated the cost of gambling using “expenditures” by problem gamblers as a proxy for societal costs.

This gross expenditure figure is then deducted from personal consumption expenditures in the GPI net income calculations.

Australian estimates show that around 290,000 people are considered to be problem gamblers (2.1 percent of the adult population).

This group lost $3.5-billion (Australian dollars) in 1999—approximately one-third of the total expenditure on gambling


The Alberta GPI Gambling Costs

The costs of gambling for Alberta in 1999 were estimated by taking 17 percent (estimated % of contribution to gambling profits by problem gamblers) multiplied by the $13-billion gross sales of games of chance = $2,167-million in 1999-2000 in “cost of gambling” or the equivalent of $19,360 of disposable income wagered per problem gambler.

This estimated, focused only on problem gamblers, served as a proxy for the total societal cost of all gambling (both problem and non-problem).


Alberta Gross Gambling Sales

110 5561,200

13,00013,642

15,583

16,911

18,312

20,394

-

5,000

10,000

15,000

20,000

25,000

1973-74 1983-84 1991-92 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

Gam

blin

g S

ales

(Gro

ss re

venu

es) A

lber

ta $

mill

ions

Source: Alberta Liquor and Gaming Commission annual reports 1974-2005

Between 1973 and 2004 gambling sales (amount spent by Albertans) rose 18,440% compared with the rise in GDP pf only 1,541% over the same period.

AB petroleum product sales (2004) = $64 billion


Gambling in Context of the Alberta Economy

13,642 15,583 16,911 18,312 20,394

49,900 49,30042,900

57,20064,400

144,789151,274 150,814

171,175

187,152

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

2000 2001 2002 2003 2004

$ m

illio

ns

Gross gambling salesPetroleum product salesGDP

Gambling sales =

10.9% of GDP

Oil and gas sales = 34.4% of GDP


Amount wagered by Alberta problem gamblers **

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

Est

imat

ed a

mou

nt w

ager

ed b

y pr

oble

m g

ambl

ers

in$

milli

ons

Source: Derived by author from Alberta Lotteries and Gaming annual reports based on 39% of revenues generated by problem gamblers

$7,953 million

6000 VLTs: $126,538 per machine7055 slots: $110,659 per machine16 casinos3 racing centres

** Assumes 4% of gambling population are moderate to serve problem gamblers


Alberta gross gambling sales by source

0

5000

10000

15000

20000

1973-74 1983-84 1991-92 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

VLTs

Pull-tickets

Lotteries

Bingos

Casino Gaming and eletronic racingterminalsRaffles

Racing


Annual % change in gambling revenues vs. GDP

4.9%

14.2%

8.5% 8.3%

20.6%

4.5%

13.5%

9.3%

-0.3%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2000-01 2001-02 2002-03 2003-04 2004-05

an

nu

al p

erc

en

t ch

an

ge

annual % increase in gross gamblingsalesannual % increase in GDP


$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Estimated amount wagered per problemgamblerPersonal expenditures per capita

Alberta amount wagered by each problem gamblers vs. personal expenditures per capita

$95,779

$27,406

Each problem gambler is estimated to have contributed $19,977 (on average) to gross gambling profits in 2004-05

Median total income per Calgarian in 2003 was $28,100 and $26,600 in Edmonton


Alberta oil royalties vs. gambling profitsTo completely offset VLT and casino gaming and electronic racing terminals would require an increase of 2.14 times the current oilsands royalty rate which would still leave oilsand royalties at 73% of conventional oil royalties in 2004.

1,588.3

1,178

1,763.5

1,991

(300.0)

200.0

700.0

1,200.0

1,700.0

2,200.0

Gambling Gross Profits Conventional and oilsands royalties

2003-042004-05


A Conceptual GPI Gambling Impact Index

Economy

0102030405060708090

100Contribution to GDP

Gaming industry revenuesEmployment

Labour productivity

Loss of other govt. tax revenues

Govt addictions program costs

Distributive impacts on other sectors

Consumer surplus

Gambling exp. as % of disposable income

Personal bankrupcty

Loss of quality family time

Abenteeism

Job productivitySuicide

Substance abuseStress

Disease-physical healthSelf-rated health

Domestic violence

Financial stress

Bankruptcy

Family breakdown

Loss of family time

Crime

Social cohesion

Charitable giving

Property values

NoiseAir quality

Land use impacts

IndividualPersonal Health

Household

CommunityWorkplace

Environment


Conceptual GPI Full Benefit-Cost StatementGPI Full Cost-Benefit of Gambling

Gambling BenefitsContribution to GDP

Gambling industry operating and capital expendituresHousehold expenditures on games of chance

Government gambling gross profits

Regrettable Social CostsGovernment defensive expenditures (addictions programs)Cost of loss of labour productivityCost of unemployment/underemploymentCost of family breakdownCost of domestic violenceCost of crime related to gamblingCost of suicideCost of substance abuse related to gamblingCost of loss of social cohesion in community and familyReductions in charitable givingValue of losses to volunteerismValue of lost quality time with family, friends and for leisureValue of morbidity, disease and premature mortalityValue of reduced property values

Regrettable Environmental CostsCost of noise pollutionCost of loss of ecosystem services due to landuse impactsCost of air quality reductions

Net Economic Welfare


Genuine Wealth

Mark Anielski [email protected]

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Genuine Progress Indicators (GPI)

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