Index of Sustainable Economic Welfare

Until quite recently, the most important measures to judge the health of the markets and, therefore, the economy have been the Gross National Prod- uct (GNP), the Gross Domestic Product (GDP), and the Gross National Income (GNI). Despite the absence of real standardization in this sense, it can be said that these measurements are used by any economic actor to measure the success of economic development: International !nancial agencies, economists, politicians, !nanciers, and citizens commonly use these measurements and economic indicator. Notwithstanding, the current economic litera- ture unanimously believes that GNP, GDP, and GNI cannot represent a perfect measure of well-being. On the contrary, different limits are recognized, including the fact that they measure market activity without taking into account the numerous social costs. This has led several scholars to develop a series of indices to overcome the limits of these monetary measurements and to systematically measure the costs and bene!ts of growth. One of the !rst and most relevant alternative measurements is the Index of Sustainable Economic Welfare (ISEW), which represents an alternative to GDP as it provides an integrated approach for measuring economic development through the simultaneous use of different macro-economic variables together with some social and environmental aspects. In other words, it is a sort of integrated index of economic development composed of a list of variables that seek to integrate traditional macroeconomic performance measures with some information on social, institutional, and environmental aspects.