Ecological and human health tell the truth about the status of our economy, the environment, and social progress.

Imagine a world where humanity’s basic needs are met. Production is sustainable, and consumption is a mindful practice. Food is local, low-impact, healthy, and accessible. In communities, decision-making power is rooted in stakeholder consultation. Workplaces are safe and fair, and workers’ interests are protected. Social equity and distributive justice drive progress. The interests of the environment and economy are deeply intertwined, prioritizing the longevity of resources and human wellbeing within planetary boundaries. Land is co-managed by those who live on it. Natural resources are valued for their life-giving services, and decisions about development are not solely in the hands of large corporations. Economic growth takes a balanced approach that respects our planet’s ecological limits while meeting everyone’s needs.

This vision paints a picture of some goals of the ‘just transition.’ a framework to equitably shift our economy to circular systems in a holistic way. Restoring environmental balance is a key aspect of the transition. In order to get there, we must address some glaring problems with our current economic system; namely, the myth that we are doing fine environmentally, socially, and economically as long as the Gross Domestic Product (GDP) is growing.

The Problem with the GDP

What if the next time you went to the doctor for a cold they only looked in your ears? What if the doctor walked in, took a peek into each ear, and said, “You seem healthy to me.” You would be justifiably skeptical.

“Don’t you want to listen to my lungs? Or hear about my symptoms?” you might ask. After all, every other doctor’s visit you have ever been to has been a predictable and methodical series of tests and metrics: height, weight, birthdate, symptoms, “open your mouth and say ahh.” However, this doctor insists that they have all the information they need based on looking into your ears, and you are not sick. It seems silly because ears are only one health indicator in a sea of other interacting bodily systems. Healthcare, at its essence, is scientific detective work. It paints a comprehensive picture of a person’s health to rule out illnesses and theorize a general diagnosis. A single criterion cannot be used to form a scientific conclusion because it makes too many assumptions.

If a scientist would never use one over-simplified test to form a conclusion, then why have economists historically used monetary income–GDP–as the sole determinant of economic health? In the global north’s more recent history, ecology and economics developed as separate disciplines that used fundamentally different principles to examine the ways in which living systems organize, grow, and interact. The neoclassical economic paradigm gained prominence in the late 19th and early 20th centuries with a focus on the efficient allocation of resources via market mechanisms. It emphasizes growth as a marker of societal progress and wellbeing. This promotes a cowboy economy that idealizes limitless, reckless, and often violent consumption.

While environmental scientists were studying interactive system dynamics in nature, economists were building a model that showed how households (consumers) and firms (companies) interact. They did so without collaboration between the two disciplines to examine the similarities of system dynamics.

Are you tired of seeing images like this yet? (Source: Steffen, et al., 2015)

The paradigm used the GDP as an indicator of economic welfare; if a country had a growing GDP, it meant technology, development, and human well-being were rising along with it. At the same time, economists’ belief was that even if most of the wealth was going to a small percentage of the population, it would inherently trickle down to the rest of the population and lead to better technology, business, and health. Contrary to its assumptions, a rising tide historically does not lift all boats; rather, the wealth gap has increased dramatically in many countries. Meanwhile, the richest 10% of the global population responsible for 48% of greenhouse gas emissions. It’s also no secret that exponential GDP growth correlates with exponential increase in other, less desirable outcomes: greenhouse gas emissions, surface temperature, and ocean acidification, just to name a few. Who does this simplistic image of our wellbeing serve? Who does it hurt or leave behind? And what does this metric say about our non-monetary work: housework, caretaking, and other unpaid labor?

David Cook is a post-doctoral researcher and adjunct lecturer in the Environment and Natural Resources program at the University of Iceland, whose research focuses on the interlinkages between economies and human wellbeing. He shared, “The main problem is it [the GDP] counts everything as a positive and nothing as a deduction. So, it’s a very good measure of how much economic activity is going on, and that’s a good thing, but it’s also a very bad measure because it accounts as positives a lot of things we might consider are detrimental to our wellbeing. For instance, if there’s an act of pollution, the economic activity–the cost of pollution and the cost of cleanup–both count as positives in gross domestic product. So gross domestic product and growth can continue to correlate to activities that we might consider to be very bad for us.

“Another issue is, it’s a measure of how much activity goes on through market transactions. Most of it is comprised of consumption… We as citizens consume a lot of things that aren’t necessarily good for us. We might say we are quite wasteful in some regards. So, for instance, the food that we buy: so much of it these days is thrown away. And so many things we

An economic model nested within the greater system. An exponentially growing box will eventually put pressure on the surrounding circle. (Source_ Daly, 2005).

buy also have what we call externalities, negative consequences for society in terms of wellbeing. Pollution [is] the most prominent example: greenhouse gas emissions, particulate matter, all of those things that occur as a consequence of production and consumption of goods and services…None of this is typically accounted for within gross domestic product.”

One way to shift the paradigm is through the valuation model ecosystem services, which assigns a dollar value to natural resources to include them in the economy. Ecosystem services factor in the life-giving ecological systems that serve our continued existence by assigning value to natural phenomena, such as nutrient cycling (supporting), climate (regulating), and timber (provisioning). It is challenging to accept that money “talks” so persuasively that the monetary valuation of the natural systems that maintain our existence is the only way the ecosystem can fit into our current economic structure. A common criticism is that these estimates greatly undervalue the immensity of what nature gives us to continue living. We can begin to shift our worldview by squeezing the neoclassical economic model into the greater ecological system and including the inherently valuable forces that build the true economy of organism survival on this planet.

According to Iceland’s “Agreement on the Platform for the Coalition Government of the Independence Party, the Left Green Movement and the Progressive Party (2022)” the government aims to promote economic and social stability while addressing climate change with a 55% reduction in direct emissions by 2030. The 59-page document has promising goals for environmental restoration and thorough community consultation for sustainable development. At the same time, one of the first lines of the document is, “Growth and wellbeing are the government’s guiding lights in economic affairs.” In some ways, politicians still fail to acknowledge that economic growth does not necessarily equate to environmental and social welfare. Governments in wealthy countries do a disservice to their people by not changing the narrative to focus on fixing breaks in the system rather than blindly expanding them. For example, the U.S. government’s 2023 economic report contained the word ‘growth’ 197 times, mostly in reference to the importance of increasing economic growth via the GDP. Trying to keep the neoclassical paradigm alive while simultaneously promoting ecological wellbeing can create vague, contradictory governance priorities that try to capture the interests of both worldviews. So, what can we do? How do we decouple growth from welfare and ensure ecological wellbeing on Earth within the limit of our planet’s boundaries?

Beyond the GDP: Other Metrics for Environmental, Economic, and Social Wellness

One alternative economic measure to the GDP is the Human Development Index (HDI), which takes into account GDP per capita (standard of living) but additionally factors in health (life expectancy) and education level per capita, where each of these criteria is weighted equally. It’s a simplistic alternative, but it’s a step towards considering other factors with a clearer image of a nation’s holistic progress.

Another emerging tool is the Genuine Progress Indicator (GPI). David Cook researches alternative metrics for measuring economic wellbeing; one of his publications with co-author Brynhildur Davíðsdóttir, “An estimate of the Genuine Progress Indicator for Iceland, 2000-2019,” looks into the application of this economic metric system that may be more sophisticated than counting all economic activity as a net positive for the GDP.

“When we’re thinking about gross domestic product, I always say that we shouldn’t just throw it away,” David said. “There are people who think that we should because it’s a poor measure of wellbeing. But it’s actually important as one measure of activity…What we need are additional measures that capture some of the issues related to the social dimension: quality of life, material living standards, and also sustainability. The GPI is one approach that captures some aspects. The way in which it differs from the GDP is that it tries to take monetary deductions for environmental and social costs…on the environmental side, costs of greenhouse gas emissions, air pollution, and soil erosion. Also recognizing benefits…trying to include a value for things like parenting and voluntary work.

“So, in a way, it’s a more nuanced approach to macroeconomic progress, but still everything is converted into a unit of money and some of those things are still quite difficult to convert into units of money. Sometimes, especially in the case of Iceland, there can be lots of data shortfalls as well…You end up using numbers that maybe are not ideal and sources that are not ideal. But that’s one way of measuring progress. You say the gross domestic product is a poor macroeconomic measure of wellbeing; let’s complement it and supplement it with something else that might be a bit better but still a monetary unit of measure of progress,” David added.

The doughnut economy models sustainable environmental and social development within planetary boundaries. (Source_ Kate Raworth)

Flourishing Within Limits: The Doughnut Economy

Assessing the interconnectedness of our pressing social, economic, and environmental issues is a crucial step toward the equitable transition to a better system. David shared some emerging solutions to the growth problem. On the topic of the economic paradigm shift, he said, “Increasingly, I’m attracted to the vision that’s presented in what’s called doughnut economics, and the doughnut economy is a framework that’s emerged really over the last 10 years or so by Kate Raworth, a British economist.

“The doughnut economy looks at the ways in which we can fulfill minimum societal needs at the same time as not placing excess pressure on planetary boundaries…Richer nations like Iceland and the Nordics meet pretty much all the basic fundamental social needs; housing, shelter, having a voice politically, gender equality. But they’ve done so at the detriment of some of the planetary boundaries, like the ones to do with climate change and land use and those kinds of things. So the question is, can we actually transition to an economy whereby we can fulfill our social needs but not place undue pressures on the environment? And that’s the richer perspective but there’s also the issue of nations that are upcoming, the expanding economies, the new economies, the growing economies in Africa: underdeveloped economies. What are they going to do? Are they going to follow the same pathway that we have done as a developed nation, placing this pressure on the environment that is in excess and likely to lead to tipping points that will undermine wellbeing for decades and centuries to come? Are they going to do it through fossil fuels and go down that pathway? So those are some of the complexities, the fact that we are responsible for some of the problems on our planet as richer nations and the fact that we have to lead the transition to the reality where we don’t place so much pressure, but we still fulfill social needs,” he said.

The role of the global south in the just transition will become more critical to understand as we consider their responsibilities and equitable development pathways. It’s a complex challenge, as many of these countries are on the receiving end of the consequences of fossil fuel dependency and biophysical crises largely caused by consumption in the global north.

Balance and Just Transition

To shift the economy to a different value system may feel insurmountable. One important thing to note is that the economic transition described here is not to a newly invented economy; rather, many of the values presented in the doughnut economy model have existed in Indigenous communities for thousands of years. Innovation to address emerging environmental issues is important, but we still live in a closed system where the same materials have been cycling for all of human history. We can take solace in the fact that many Indigenous communities around the world operate under an ecological economic system and have the expertise to guide what our ideal reciprocal structure could look like.

Take the example of the traditional Sámi economy in northern Scandinavia, which revolves around their self-determined institutions for governance. Historically, Sámi community governance has valued reindeer husbandry, hunting, and fishing nomadism shaped alongside social and cultural wellbeing. The wider population of 70,000 to 80,000 Sámi people across Sweden and Norway have developed autonomous, sustainable economic systems over millennia. At the same time, the energy transition in Sweden has largely overlooked Sámi interests and come at the expense of their lands. Much like blind growth, blind economic transition or transition at all costs mentalities can result in the continuation of inequities that drive the recklessness of the cowboy economy, perpetuating the clash between the social, economic, and environmental dimensions. The vision for economic wellbeing requires a just transition, and that transition must prioritize Indigenous sovereignty and community collaboration to address our social needs within the environmental ceiling.

Ecological Wellbeing and the Economy of the Future