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While the GPI is intended to be a better measure of progress than GDP, it still has its shortcomings. The primary weakness of the GPI is that it is virtually impossible to include all welfare-related factors into it (Lawn 2003). This is due to a lack of available data required to place suitable monetary values on certain factors. To extend on this point, due to the nature of many social and economic variables, most of the welfare-related factors included in the calculation of a GPI are derived from other variables using some arbitrary assumptions with respect to their economic cost to society. When analysing valuation techniques for the GPI, ISEW, and Sustainable Net Benefit Index (SNBI), Lawn (2005) concluded that there needed to be a more consistent and robust set of valuation techniques. Hence, a lack of

standardisation in the valuation methods used in determining their values is a weakness, and not necessarily a reflection of accurate monetary values.

The cost of crime can be used as an example demonstrating the arbitrary assumptions that form the basis for calculating its cost to society. The Australian Institute of Criminology (AIC) attempt to place monetary values on crimes committed within Australia and the Director of the AIC, Adam Graycar, has openly admitted that “some of the figures are inevitably tenuous, as there is insufficiently good data to improve the estimates” (Mayhew 2003, p. 1). The difficulty in obtaining a value for the full cost of crime begins from the number of crimes that are actually committed – not just those recorded by police. To fill this ‘gap’ in information, victimisation survey results are employed. For each of the different types of crime, the difference between the number of crimes reported by police and the number of crimes estimated in the surveys are then used to calculate a ‘multiplier’ for future years. Other costs which are considered are medical costs, lost output, as well as intangible costs such as the value of pain, suffering and lost quality of life that has been incurred through crime.

The number of homicides is generally easy to quantify, therefore the use of a multiplier is not needed. The AIC base medical costs for victims and lost productivity on a study by the Monash University Accident Research Centre. Intangible costs are proxied by a guide produced the Bureau of Transport Economics. The AIC estimated that the medical costs of homicide were $7,600 per incident; lost output was $1.2 million per incident; and intangible costs was almost $400,000 per incident.

The number of assaults committed is more difficult to quantify as not all incidences are reported. Furthermore, the full cost of assaults to society is complex as a distinction is made between non-injury and injury assaults, and higher costs are associated with attempted homicides. As not all assaults with injury require medical treatment, this is accounted for when quantifying this amount by using prior estimates from the UK and extrapolating them. The AIC estimated that the medical costs of assault were $1,000 per incident; and lost output and intangible costs were $3,400 per incident.

Although monetary values can be placed on different crimes, it is difficult to incorporate every possible cost associated with crimes, let alone provide accurate costings. For example,

when the AIC places a value on homicide, it does not include the costs associated with the investigation, prosecution, trial and imprisonment of homicide offenders, the costs of supporting surviving dependents of victims and offenders, and any intangible costs that are borne by family and friends of homicide victims. The costing of assaults by the AIC is also not comprehensive. It does not differentiate incidents of child abuse which could potentially have higher costs due to the risk of ‘second generation’ crimes by those that were abused as children. The cost of potentially lower educational and occupational achievement as well as the probability of domestic violence are also not considered. The cost of crimes estimated are sensitive to the assumptions made and may therefore fluctuate. Although quantifying a component such as crime is useful in measuring the genuine progress of a nation, these figures are ultimately based on arbitrary assumptions that should be used with caution.

A further weakness of the GPI is the dominating effect of certain items (Neumayer 1999). Factors such as consumption expenditure may have such large values that they may result in having a much larger impact on the GPI than a factor with relatively smaller values, for instance, the cost of air pollution. In addressing this issue, Lawn (2003) suggests breaking down dominant items into several smaller items. In Neumayer’s study, the weighting of the distribution index was flagged as having a direct influence on the outcome of the GPI. Neumayer states that depending on the distribution index applied, this can greatly affect the GPI result.

In terms of measuring sustainability, Neumayer (1999) rejects the GPI’s claim to do so as “the distribution of income at any given point of time does not directly impinge upon the capacity to provide future welfare” (p. 84). Due to the ability of personal income distribution to alter significantly over just two or three generations, Neumayer claims that the current income distribution is practically irrelevant for future generations. Lawn (2003) suggests a possible way of overcoming this problem is to create a second index that takes into account anticipated future benefits and costs of current actions.

In addition, Lawn (2003) identified that an inherent weakness of the GPI is its use of current activity data, despite its underlying objective of measuring sustainable economic welfare. The concept of sustainable economic welfare requires consideration of the future impact of current activities. This issue could be broadened to other measures of sustainable economic welfare as there do not seem to be any measures that forecast future economic activity

patterns. More analysis in this area could investigate the consequences of certain levels of current activity, the impact that it would have on future activity, and the resulting sustainable economic growth.