Sustainable Economic Well-being Index (BES)

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The sustainable economic well-being index, ISEW for its acronym in English, is an economic indicator whose objective is to reflect the economic, social and cultural reality of a community, locality, country or region.

The function of this indicator is to show the economic effect, in a specific community, taking social and environmental well-being as a starting point.

Origin of the Sustainable Economic Well-being Index

The term was first used by Herman Daly and John Cobb in the late 1980s, based on the ideas of W. Nordhaus and James Tobin.

Initially, the creation of this index was carried out to replace the gross domestic product (GDP). Its main difference lies in the fact that, instead of accounting for the goods and services of the economy as GDP does, it is done by consumer spending, the utility of work minus the cost of the externalities of pollution and resource consumption.

In this way, growth could be considered taking into consideration the cost to society and the planet.

Characteristics of the sustainable economic well-being index

The index takes into account factors such as:

  • Income distribution.
  • Depletion of natural resources.
  • Economic losses attributed to environmental degradation.
  • Value of unpaid domestic work.

Advantages of the sustainable economic well-being index

There are advantages to using the sustainable economic well-being index. Among those that stand out are:

  • Owners of the means of production, the government and consumers can rely on the sustainable economic welfare index to better plan the use of resources. Since it takes into consideration that in the process of economic growth there are activities that negatively impact well-being.
  • Before making economic decisions, thanks to the use of the sustainable economic well-being index, it would be possible to know in advance the effects on a population, with which actions could be taken to minimize or correct them.

Disadvantages of the sustainable economic welfare index

For objective context, the main disadvantages when using the sustainable economic well-being index are listed below.

  • The proportion that is allocated to each of the variables can be the subject of objections among experts, making it difficult to interpret.
  • It requires the adaptation of some variables due to their availability, which can yield inconsistent results.
  • The difference in environmental information available in different latitudes of the planet could make it difficult to compare results.

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