Towards ISEW and GPI 2.0, part I: developing two alternative measures of economic welfare with distinct time and boundary perspectives for Belgium

Scholars have long had difficulties when dealing with cross-time and cross-boundary issues in the ISEW and GPI. As a result, different views exist on how to account for impacts of climate change that are shifted in time and space. This study puts forward a “2.0 methodology” that deals with cross-time and cross-boundary issues in an application to Belgium as a first step to calculate economic welfare in a standardized way for the EU-15 countries. In doing so, we address time and boundary issues by calculating two welfare measures with distinct time and boundary perspectives and introduce a number of improvements to the methodology. Experiential welfare looks at welfare that is currently experienced within domestic borders, whereas the benefits and costs of present activities also include the welfare impacts that are shifted in time and space. The former construct only registers present ecological costs within borders and does not include capital changes, while the latter includes capital changes and ecological cost-shifting. We find that both welfare and GDP improved in Belgium between 1995 and 2018. Yet, we also observe an important divergence: experiential welfare per capita and the benefits and costs of present activities improved by respectively 15% and 18%, while GDP per capita grew by 30%. As we find that for Belgium substantial ecological costs are being shifted in time and space, we suggest to move forward with the latter construct as it tracks these costs in its methodological framework. Furthermore, we also propose to look beyond the aggregate welfare level and adopt a disaggregated and dashboard-like approach to evaluate economic performance in detail.