5. Measurement and assessment of indicators

Lead Papers 

Mark Anielski, MALIK AMIN ASLAM, Dr. Peter Bartelmus,Dr. Keith G. Brown,Thomas J. Campbell,Danny Cassimon, Ronald Colman, Karine Danielyan, David Del Porto, Dr. ir. J.Dewulf and J. Mulder and H.J. van der Kooi and J. de Swaan Arons, Dott. Giuseppe Di Vita, Michele Doncaster, Alexey Drouziaka, Germain Dufour, Louise Dunne and Frank Convery, David S. Evans, C. Coulthard, I. Henderson, P. Jones, Oleg Garms, Dr. Anastassios Gentzoglanis, Dr. Hans W. Gottinger, Nikolai Grishin and Olga Tokmakova, Dr. Tee L. Guidotti, Xiaohui Hao, Mikylas Huba, Vladimir Ira, Dr. A.Jagadeesh, Kun H. JOHN and Yeo C. Youn and Jae W. Park , S. Augustinand J. Katima and E. Klawe and B. Lyimo, Natalia Knijnikova, ANITA KON,Dr. Vladimir Kremsa, Elena Krougikova, Ms. Maria V. Kryukova, Van Lantz, Tonu Lausmaa, Ming Lei, Ngo Louga Madeleine, Igor N. Malakhov, Dr. Sue L.T. McGregor, Marin R. Mehandjiev (Professor) and Krassimira R. Mehandjieva, Mr. Aubrey Meyer, Jose H. Moya, Dr. Yew-Kwang Ng, Anatoly Nikitin and Sofia Nikitina, Vincent Otto, Roland Prelaz-Droux, Akim Rahman, Dr. C. Ramachandraiah, Dr. B. Sudhakara Reddy, S. S. Sundarvel, Dirgha N. Tiwari, S.G. Patil* and L.B. Hugar* and M.S. Veerapur* and, J. Yerriswamy* and T. Cross† and A.C. vanLoon† and G.W. vanLoon†, DSc. Professor William M. Zadorsky, Dr. Katalin K. Zaim, Dr. ZhongXiang Zhang

Anastassios Gentzoglanis estimated that the Kyoto accord has set the bases for a cleaner environment and the participating countries are currently trying to develop the necessary means for attaining the targets established. The most favoured approach is the use of trading permits. This private-firm solution is debated by many as far as its efficiency is concerned. Economists, however, demonstrate the superiority of this approach compared to most direct ones such as taxes and direct penalties. Little progress has been done though world wide even in the use of this approach. The apparent difficulty lies in the uncertainty surrounding the real threat emanating from the presence of sulphur dioxide and the sheer size of costs associated with the reduction or the curtailment of the emissions of gases. Given that the costs are ten times higher than the estimated benefits little interest exists from private firms and governments to implement the necessary measures for cleaner environment.

It is argued in this paper that the estimated costs and benefits, although valid in a strict economic sense, neglect some important facets that can make an important difference in the outcome. The benefits arising from the reduction of CO2 emissions are calculated as the environmental damages that are avoided by preventing rising concentrations of gases. Although costs are calculated in a more direct way the benefits are at best uncertain. Even the direct benefits are really difficult to calculate, never mind the indirect ones. Cleaner environment and better standards of living arising out of emissions curtailment are difficult to quantify accurately. Should such comprehensive calculations were possible we would have a more balanced picture of the true costs and benefits. The international trade in emission rights reduce the calculated costs without altering drastically the ecological capital. Weak sustainability is possible and it can be achieved by relying on the market mechanisms, such tradable pollution permits.

In a ever increasing competitive environment firms have a particular interest and incentive to comply with the Kyoto accord first before their competitors do so. The competitive advantage thus gained makes them more efficient and financially stronger, not weaker. The very recent experience with an ever increasing number of firms seeking to strike deals in getting trading permits is an evidence in point. Such a market is worth more than $60 billion-a-year in the U.S. alone. If politicians agree on clear rules for international trading, the global market could in time reach a trillion dollars a year. Such a growth in the market of tradable permits is quite promising as far as weak sustainability is concerned. Governments should abide to concrete and permanent rules on trading of pollution permits so that polluters and non polluters find the way to trade their permits and reduce the pollution of the environment. By rendering markets more perfect (information becomes more symmetric) the quality of the environment in the future can only get better.

S. Augustin, J. Katima, E. Klawe & B. Lyimo have demonstrated that tropical tree plantations may be an important component of the global carbon cycle because they represent a carbon sink that can be manipulated by humans and they ca mitigate the effects of tropical deforestation, which is the main biotic source of atmospheric carbon (Houghton et al., 1983). Most forest plantations in the tropics are planted with fast growing trees that culminate in volume and biomass production earlier than natural forests. These high biomass production forests have a high capacity to sequester atmospheric CO2 and hence assist in mitigating global warming. Sequestration of CO2 in plantations occurs in tree biomass (stems, branch, foliage and roots), forest floor and as storage in the soil. Young growing forests are one of the best means to removing CO2 (the gas partially responsible for the greenhouse effect) from the air. Thus planting forests help to reduce the amount of carbon dioxide in the air (by the action of sunlight on the green chlorophyll organic compound, CO2 is absorbed by trees through the small fissures in the leaves or needless, these gases are fixed as biomass). The amounts of carbon stored in living P. patula trees seem to increase with time. But carbon is lost during the course of rotation as a result of thinning and natural mortality. 

Dr. Maria V. Kryukova and Svetlana D.Schlotgauer have shown that traditional nature use, ethnobotany, food and medicinal plant, impact of the timber industry, forest ecosystems. The Dzhango Community territories are located in the central part of Sikhote-Alin, in the Khor River watershed. This territory is attributed to the Far East broad-leafed-coniferous area, manchzhuria province, ussuri-amur district, which are characterized by high biodiversity. 800 species of vascular plants can be met here, that make 40 % of all Far East flora. The uniqueness of natural complexes manifests itself in a complete set of various forest products, which have freat economic value and easy access for the indigenous people of Udege. It is possible to single out 90 food and 94 medicinal species of plants, the most valuable as for their biological and economic potential, availability and traditional use. It is difficult to find the analogues in the world for such soecies as Schizandra chinensis, Vitis amurensis, Actinidia kolomikta, Eleutherrococcus senticosus, Aralia elata, Gastrodia elata etc, if we take their food and medicinal properties. However only small part of them is used in real economic practices according to the tradition, set during the last decades. There are a lot of for this: difficulties with gathering and processing, remoteness from the basic markets, low purchasing power of the majority of consumers in the territory. But the main reason is that the Khabarovsk Territory Administration prefer to use more favorable for using more expensive forest timber resources. The timber industry activity has the negative impact on the territory: inevitable destruction of forest ecosystems and deterioration of ecological condition, final fall of the ethnobotany, destruction of the ethnic economic complex and traditional way of living for indigenous people. The decision of these problems lies in the traditional economy intensification, which has not yet opened its opportunities to the full extent. It includes the involving in economic activity of "non-traditional" kinds of raw material and resources: medicinal grasses, tea preparations, plant seeds and seedlings, tree juices, etc.


Dr. Yew-Kwang Ng has shown that public spending, especially on research and environmental protection, is likely well below optimal due to the long-term and global public-good nature and the overestimation of the costs of raising public revenue. This overestimation arises from 1.) Economists' emphasis on the excess burden of taxation, ignoring that this is largely offset by the negative excess burden on the spending side; 2.) The failure to take account of the environmental disruption effects of most production and consumption (which make taxes largely corrective than distortive), relative-income effects (which bias in favor of private consumption), and burden-free taxes on goods with diamond effects; 3.) The failure to recognize the fact that, in non-poor countries, higher private consumption does not increase happiness at the social level, making the happiness cost of public spending virtually zero. Both reported happiness and indicators of quality of life have little positive association with economic growth but increase with scientific and technological breakthroughs at the global level. The production and consumption of most goods and services impose significant disruption on the environment either directly or indirectly (through input usage), including various forms of pollution, congestion, deforestation, etc. Ideally, taxes should be imposed in accordance to the estimated costs on the society of these environmental disruption effects. However, largely speaking, this has not happened. Thus, the general taxes on income and consumption, though designed mainly for the purpose of revenue raising, may in fact serve as rough counteracting measures to the disruption effects involved. Thus, far from being distortive, taxation may be corrective; instead of imposing positive excess burdens or distortionary costs, taxation may impose serve it improves efficiency. Given that tax rates are around 30% in most countries and the severity of the environmental effects, such may well be the case, especially if a global and long-term view is taken. At the very least, the distortive costs of taxation are far less than estimates that fail to account for the environmental effects. Most such estimates (e.g. the one by Feldstein mentioned above) do not consider the environmental effects. For a single person, an increase in income increases both her absolute and relative incomes. It is thus perceived to be very important. If the friends/school-mates of your child all receive expensive birthday gifts, you also have to give your child an expensive one. If your friends all have luxurious cars, you may feel less satisfied with your standard one. However, since public goods are simultaneously consumed by all individuals, no such relative pressures are present. This causes a bias in favour of private spending or against public spending. The benefits of public spending are underestimated (effectively equivalent to an overestimation of the costs). In most estimates, the marginal benefit of private expenditure is likely to be taken to include the absolute-income or intrinsic consumption effects plus the internal or direct relative income effect (as these two taken together constitute the worth of private consumption as it appears to each individual), but not to include the negative external or indirect relative income effects. This creates an over-emphasis in favour of private expenditure, leading to a sub-optimal level of public spending, as demonstrated more formally in Ng (1987a). Economists regard a tax of $1m as generally imposing a burden in excess of $1m, say $1.35m on the economy. (The $2.65m figure estimated by Feldstein is a remarkably high figure; $1.35m is about the average estimate). The $1m is the burden that is exactly offset by the tax revenue. The $0.35m is the excess burden that is a deadweight loss created by the taxation distortion of choice. While most economists realize that corrective taxes on say pollution involve negative excess burden or positive efficiency gain, burden-free taxes are regarded as existent only in fairyland. However, there are goods taxes on which create not only no excess burden (the $0.35m) but no burden ($1m) at all. These are pure diamond goods or goods valuded for their values rather their intrinsic consumption effects. People consume or hold these goods to show off their wealth, to use them as stores of value or gifts of value. Cubic zirconia looks exactly like top quality diamond but costs only a tiny fraction of true diamond. But no one gives his fiance an engagement ring of cubic zirconia. For such goods, it is the value (price times quantity) that enters the utility function of the consumer rather than the quantity, as posted in economic analysis. As prices increase due to higher taxes on these goods, consumers may just spend the same amounts to buy the same values without real losses. The revenues raised are pure gains, suggesting arbitrarily high taxes on them (Ng 1987a). While many goods (most precious metals and stones, top brands of most goods especially conspicuous items like cars and wines) possess various degrees of diamond effect, few if any good is a pure diamond good. Nevertheless, very high taxes on mixed diamond goods are still efficient. Moreover, as consumers may wish to consume the value (pure diamond) aspect of the mixed good so much (such as to show off their wealth) as to incur negative utility on the intrinsic consumption aspect (such as health-threatening excessive drinking), taxes on such mixed diamond goods may actually make consumers better off (being able to show off to the same extent without drinking to excess), as shown in Ng 1993. When one is starving, increase consumption is essential. However, after the satisfaction of basic biological needs, there is increasing evidence that increases in private consumption fail to increase happiness at the social level. Individuals still engage in the rat race for making more money and consume more mainly due to the competitive aspect related to the relative-income, relative-consumption effects discussed above. It is true that happiness is difficult to measure and compare objectively. However, conceptually, it is cardinally measurable. A practical method has also been developed and used to measure happiness cardinally and interpersonally comparably. Though most existing measures of happiness have more problems with their comparability, they are not completely useless. Different researchers come up with largely consistent results which also correspond with alternative measures like the opinions of friends. If one wants to be pedantic in insisting on perfect accuracy, even the measurement GDP is open to query on its accuracy and comparability.

The relationship between happiness and income level inter temporarily within the same country (at least for the advanced countries which have such data) does not have a positive relationship. For example from the 1940's to 1994, the real income per capita of the US nearly trebled. However, the percentage of people who regard themselves as very happy fluctated around 30%, without showing an upward trend; another measure of average happiness fluctuated around 72%. Over the period 1958-88, the per-capita real income level in Japan increased by more than five times . However, its average happiness measured fluctuated around 59%, also without an upward trend. In fact, 'if there is a casual relationship in rich countries, it appears to run from happiness to growth, not vice-versa' . Also, recent research suggests that individuals who strongly value extrinsic goals (e.g. fame, wealth, image) relative to intrinsic goals (e.g. personal development, relatedness, community) have less happiness. Kenny  also puts the point of fast diminishing marginal utility of income in more objective terms thus: 'Compare Mozambique, China and the USA. In turn, the countries' GNPs per capita in 1992 were $80, $470 and $24,740. Infant mortalities were 145.6, 30.5 and 8.6 per 1,000 live births, respectively. Life expectancies were 47, 69 and 76 years. Thus, going 1.6 percent of the distance between Mozambique and the United States in terms of wealth, so reaching China's income, we move 84 percent of the distance in terms of infant mortality and 76 percent of the distance in terms of life expectancy.'
On the other hand, there are factors that affect or at least correlate with happiness much more significantly than income, including being married or single, being employed or not , and having a religious belief and church attendance. For those who do not trust the more subjective measure of happiness and opt to use more objective indicators of the quality of life, the picture is not much different. Analyzing a panel dataset of 95 quality-of-life indicators (covering education, health, transport, inequality, pollution, democracy, political stability) covering 1960 - 1990, Easterly (1997) reaches some remarkable results:

1. While virtually all of these indicators show quality of life across nations to be positively associated with per capital income, when country effects are removed using either fixed effects or an estimator in first differences, the effects of economic growth on the quality of life are uneven and often nonexistent. "For the fixed effects estimator applied to 95 indicators, the coefficient of income was significant at the 5% level for 40 indicators. This is not so bad, except that only 23 of these 40 show improvement in the quality of life associated with rising income. It is distressing that almost as many indicators show significant deterioration in quality of life" (Easterly 1997, p. 18).

2. Most of the exogenous time shifts (69 out of 95 indicators) improve the quality of life and time shifts are more important than growth effects in the majority (62% of the 79 available indicators) of indicators. Even for the only 22 out of the 95 indicators with a significantly positive relationship with income under fixed effects, time improved 10 out of these 22 more than income did.

The surprising results are not due to the worsening income distribution (there is some evidence that the share of the poor gets better with growth). Rather, the quality of life of any country depends less on its own economic growth or income level but more on the scientific, technological, and other breakthroughs at the world level. These depend more on public spending than private consumption.

If private consumption does not increase happiness (at the social level), public spending that reduces private consumption may be costly in dollar terms but not in happiness terms. Since money is not our ultimate objective while happiness is, reckoning in dollar instead of happiness terms overestimate the ultimate cost of public spending.

From the various factors discussed above, the costs of public spending have been grossly overestimated. While it is desirable to do away with the inefficiencies in public spending if possible, it increases in public spending, especially in research and environmental protection, that can really increase our welfare. The recent trend to check the growth in public spending may be grossly inefficient. In fact, Ng and Ng (forthcoming) shows that economic growth increases the optimal share of public spending and that, without directly dealing with environmental disruption, economic growth may reduce welfare even if the shares of public spending and environmental protection are being optimized.

In addition to the above considerations, public spending on research and environmental protection is also likely to be grossly sub-optimal due to its long-term and global public-good nature. Scientific advances and a cleaner environment benefit the whole world for generations to come. Decisions taken by national governments with relatively short time horizons results in sub-optimal spending in these areas even before we consider the factors accounting for the overestimation of the costs of public spending discussed above.

An indicator measures the employment level (the number of persons employed), unemployment rate (the number of unemployed persons as a per cent of the labour force) and labour force participation rate (the total number of employed and unemployed divided by the size of the working-age population). Categories are usually shown by age, gender, and industry. These measures are fundamental indicators of a healthy economy(Dufour).

An indicator measures the proportion of workers who rate their job satisfaction as poor, fair, good or very good, and it indicates whether or not people find their paid employment meaningful, creative and rewarding. Job satisfaction is also related to productivity levels.

An indicator measures the debt accumulated by federal, provincial, regional, and municipal governments on a per capita basis. The accumulated per capita debt represents the economic burden we are passing on to future generations.

Evaluation of indicators

A.   Economic indicators and indices
B.   Sustainable economic development indicators and indices
C.   Debt and deficit indicators
           C.1   Federal debt and deficit
           C.2   Provincial debt and deficit
           C.3   Budgets
           C.4   Auditor General's reports
D.   Export development indicator
E.   International Monetary Fund (IMF)
F.   General Agreement on Tariffs and Trade (GATT)
G.   North American Free Trade Agreement (NAFTA)
H.   Pacific Rim Nations
I.   Urban development indicators and indices
           I.1   Sustainable community development
           I.2   Essential elements of an adequate urban environment
           I.3   A sustainable community development code
           I.4   Costs of subdivision development
           I.5   Development impacts
           I.6   Urban park indicators
J.   Rural development indicators and indices
           J.1   Costs of living
           J.2   Lifestyle
           J.3   Costs of services
           J.4   Community development
           J.5   Farming indicators
K.   Recreational development indicators and indices
L.   Business development indicators and indices
           L.1   Sustainable development means cleaner and leaner businesses
           L.2   Environmental performance indicators and indices
           L.3   Profitable solutions to environmental management
           L.4   Training offered by companies vs skills needing enhancement
M.   Better business, better science and better decision-making
N.   Research and development
O.   Developing countries indicators
           O.1  Environmentally oriented strategies in helping developing countries
           O.2   Sustainable third world development
P.   Building materials indicators, building design indicator and building code
Q.   Investments indicators and indices
R.   Profitability indicators and indices
S.   Consumer products indicators and indices
T.   National and global trade indicators and indices
U.   Gross Domestic Product (GSDP) vs GSDP
V.   Imports indicators and indices
W.   Money value indicator
X.   Stock exchange indicators
Y.   Property value indicators and indices
Z.   European Community Market indicators and indices

Evaluation of Economic Development Issues and Concerns

1.    Manufacturing
2.    Power
3.   Labour Force
4.   Sustainable economic development requires healthy families, able workers and informed, responsible citizens
5.    Markets
6.    Competitiveness of the economies in the world and ensuring a sound sustainable development
7.   Economic value of natural resources and ecosystems
8.    Impact of the depletion and degradation of natural resources and ecosystems on human welfare
9.    Deforestation
10.   International Institutions
11.    Integration of environmental and economic institutions
12.    Economic cost of resource and environment degradation (in terms of production and health)
13.    Industry
14.    Business
15.    Construction
16.    Rural Development
17.   Urban Development
18.   Stock Markets
19.    Exports
20.   Imports
21.   Growth
22.    Goods and Services
23.    Incorporation of production-related environmental costs in the price of goods traded in national and international markets
24.    Demand
25.   International Cooperation
26.    Make economic accounting relevant to sustainable development objectives
27.   Trade
28.   Investment
           i)    Regulation
           ii)    Risk
29.    Credit
30.   Aid
31.    Distribution of Income
32.    Consumption
33.    Expenditures
34.   Transport
35.   Communications
36.    Prices
37.    Exchange Rates
38.    World Bank
39.   IMF
40.   Banks
41.   Government
           i)    Finances
           ii)    Revenues
           iii)    Expenditures
           iv)   Debt and Deficit
           v)    Defense Expenditures
           vi)    Budget
           vii)    Taxes
42.    Balance of Payments
43.   Information Age
44.    Science and Technology
45.   Training
46.    Regional Trade Blocs
47.   Tariff Barriers
48.   OECD Trade
49.   Travel
50.   Tourism
51.   Measurement of Indicators
           i)    Economic: growth, production, demand
           ii)    Macroeconomic
           iii)   National Account: GDP per Capita
           iv)   Gross Sustainable Development Product (GSDP)
52.   Profitability
53.    Insurance premiums
54.   NAFTA
55.    Competitiveness
56.    Property value
57.    Tax system
58.   Building materials
59.    Building and community design and codes
60.    Employment
61.   Training programs
62.    R & D
63.   Transportation
64.    Urban development
65.   G-7
66.    GATT
67.   World monetary institutions
68.   Sock Exchange
69.   Monitoring
70.    Making results of measurements available on the Internet
71.   Economic well-being
72.   Globalization
73.    Rural development
74.   Global development