Index of Sustainable Economic Welfare for Puerto Rico

Transcription

Index of Sustainable
Economic Welfare for
Puerto Rico
•
Jose Israel Alameda-Lozada, Ph.D.
Ivonne del C. Diaz-Rodriguez, Ph.D.
Department of Economics at the University of Puerto Rico,
Recinto Universitario de Mayaguez
INDEX OF
SUSTAINABLE
ECONOMIC
WELFARE OF
PUERTO RICO
Jose Israel Alameda-Lozada, P.H.D
&
Ivonne del C. Dlaz-Rodrlguez, P.H.D;
Department of Economics at the University of Puerto Rico,
Recinto Universitario de MayagUez
h
TABLE OF CONTENT
II
RECONOCIMIENTO
PROLOGO (JUAN ROSARIO, MISION INDUSTRIAL)
RESUMEN EJECUTIVO
IX - XIII
EXECUTIVE SUMMARY
XIV - XVIII
I.
III - VIII
Introduction
A.
A.1.
B.
4
Conventional Measure of Economic Growth
National Income and Product Accounts (NIPA) and the Gross
6
Domestic Product (GOP)
Alternative Measures of Economic Welfare
B. 1
B.2
B.3
6
Measure of Economic Welfare (MEW)
7
The Index of Sustainable Economic Welfare (ISEW)
The Genuine Progress Indicator (GPI)
7
8
C.
The Max-Neef Threshold Hypothesis of Welfare versus Economic
Growth
9
D.
The ISEW and the Pursuit of Sustainable Development
11
E.
The Needs of ISEW Accounts for Puerto Rico
12
II.
Building the ISEW Accounts for the economy of Puerto Rico
14
A.
Consumer Expenditure and Income Inequality Adjustment (Columns B
and C)
15
B.
Services from Domestic Labor (Column E)
16
C.
Services from Consumer Durables (Col. F)
19
D.
Difference (Col I - Col F) between Expenditures and the Value of
Services from Consumer Durables (Col. I)
22
E.
Services from Streets and Highways (Col. G)
F.
Public Expenditures on Health and Education (Col. H)
22
25
G.
Defensive Private Expenditures on Health and Education (Col. J)
29
H.
Cost of Commuting (Col K)
29
I.
Cost of Pollution Control (Col. L)
36
J.
Cost of Automobile Accidents (Col. M)
36
K.
Cost of Water Pollution (Col. N)
40
L.
Cost of Air Pollution (Col. 0)
40
M.
Cost of Noise Pollution (Col. P)
40
N.
Cost of Wetland Losses (Col. Q)
42
O.
Depletion of Non- Renewable Resources (Col. S)
P.
Carbon Dioxide Emissions Damage (Col. T)
49
Q.
Cost of Ozone Depletion (Col. T)
49
R.
The Cost of Crime
51
R.1
R.2
R.3.
Victim Losses
55
R. 1.a Domestic Dispute
56
Public and Private Costs of Justice
46
57
Private Defensive Expenditures of Crime losses,
Prevention/Detection.
58
R.3.a Retail losses due to fraud, theft and shoplifting 58
R.3.b. Home and Business Expenditures in Security Systems
59
R.3.c. Private
60
Security
Guards and
Private
Investigators
R.3.d. Burglary and Theft: premiums and losses paid
RA.
Offense to Society
R.5
L
60
RA.a. Drug trade and trafficking
60
RA.b. Illegal Gaming
62
RA.c. Illegal Selling
("Piracy").
Total Cost of Crime
60
of
New
Technological
62
63
Products
III.
Index of Sustainable Economic Welfare (ISEW)
References
65
71-74
Appendix A: Graphs ISEW and GOP: International Comparison
75-82
Appendix B: Table B-1-- Total Cost of Crime at 2000 prices:
Fiscal Year 1970 to 2006
83-84
-.1
The welfare of a nation can scarcely be inferred from a
measurement of national income as defined by the GDP... goals for
'more' growth should specify of what and for what.
Simon Kuznets,
creator of GDP, 1962
The gross national product does not allow for the health of our
children, the quality of their education or the joy of their play. It
does not include the beauty of our poetry or the strength of our
marriages, the intelligence of our public debate or the integrity of
our public officials. It measures neither our wit nor our courage;
neither our wisdom nor our learning; neither our compassion nor
our devotion to our country; it measures everything, in short,
except that which makes life worthwhile.
Robert F. Kennedy, 1968
Not everything that can be counted counts, and not everything that
counts, can be counted.
Albert Einstein
Too many people today know the price of everything and the value of
nothing.
Ann Landers
_
ACKNOWLEDGEMENTS
The authors recognize the valuable contribution of Alfredo Gonzalez Martinez,
Wilfredo Ruiz Oliveras and Roopchand Ramgolam, retired professors from the
Economics Department at the University of Puerto Rico at Mayaguez. They would
like also to acknowledge Beatriz Rivera and Nelly Ramos Vazquez, due to worthy
grammatical and styling advises. A special recognition goes to Juan Rosario from
Misi6n Industrial, because he planted the first seed of this methodological
approach.
To all of them, go our "Gracias".
RECONOCIMIENTOS
Los autores reconocen las valiosas aportaciones de Alfredo Gonzalez Martinez,
Wilfredo
Ruiz
Oliveras
y
Roopchand
Ramgolam,
profesores
retirados
del
Departamento de Economia del Recinto Universitario de MayagUez de la
Universidad
de
Puerto
Rico.
Igualmente
reconocen
las
consideraciones
gramaticales y de estilo de las senoras Beatriz Rivera y Nelly Ramos Vazquez. El
reconocimiento intelectual y especial, a Juan Rosario, luchador ambiental de
Misi6n Industrial, quien brind6 la primera semilla de este enfoque metodol6gico.
A todos ellos nuestras mas expresivas muestras de agradecimiento.
11
PROLOGO
EL GOBIERNO DEL BRUTO
A Puerto Rico lo gobierna un Bruto, que no tiene la sensibilidad que hace falta
para distinguir entre el bien y el mal. A Puerto Rico lo gobierna un ente que confunde
lo que produce beneficios para el pais con lo que le hace dana al pais. Por ello las
decisiones que impulsa son cada vez mas resentidas por la mayorfa de los
puertorriquenos, que son los que en ultima instancia tienen que sufrir, de la manera
mas descarnada, los efectos de esas decisiones.
No obstante, la mayorfa de los ciudadanos, incluyendo los que sufren en carne
propia los desmanes del mismo, continuan apoyando a ese Bruto. Las razones para ese
apoyo son multiples. Para comenzar, la mayorfa de la poblacion ni siquiera reconoce
que hay una relacion entre sus males y el gobierno del Bruto. Y es que este Bruto tiene
demasiada gente que le da su respaldo, sobre todo algunas personas que por su
preparacion profesional deberfan saber mas que nosotros, ciudadanos comunes, sobre
las capacidades de este ser. Entre los hombres de negocio, los industriales, los
comerciantes, en fin "las fuerzas vivas" del pais, el Bruto tiene un respaldo amplio.
Donde esta insensible criatura goza del mayor respaldo es en los sectores
financieros: los banqueros, las casas de corretaje, los inversionistas, los analistas y
sobre todo los economistas. Entre estos ultimos el respaldo al Bruto, no solamente es
unanime, sino visceral. Nadie perteneciente a esta clase profesional osarfa cuestionar
siquiera las bondades de nuestro gobernante. Si no lo cree, escuche las noticias en la
radio, vea los reportajes de los estados de situacion del pais en la television
periodicos,
0
en los
especialmente en las secciones de negocios, y vera que nadie,
absolutamente nadie que haya sido bautizado en las aguas bautismales del altar de la
economia, se atreve a cuestionar la supremada del Bruto so pena de ser excomulgado.
Escuchen con cuidado porque esa unanimidad parece resquebrajarse. Desde el
oeste de Puerto Rico -tenia que ser lejos de la capital- dos economistas le han salido
al paso al gobierno absoluto del Bruto.
iii
L
Nunca en Puerto Rico, que tengamos conocimiento, ningun iniciado en las
ocultas artes de la economia se habia atrevido a cuestionar el gobierno del Bruto.
Ahora no es uno sino dos, y lo hacen con el rigor que requiere la tarea de examinar
con seriedad una verdad que, no solamente no se discute en nuestro pais, sino que
pertenece al reino de las verdades absolutas y evidentes que, por axiomaticas, no
pueden ser cuestionadas. El Dr. Jose I. Alameda-Lozada y la Ora. Ivonne del C. OiazRodriguez, economistas y profesores del Recinto Universitario de Mayagiiez, comienzan
a ponerle el cascabel al gato de uno de los entes mas poderosos del gobierno de
Puerto Rico.
No nos referimos al gobernador de turno. El Dr. Alameda y la Ora. Rodriguez no
tienen tiempo para lo inmediato, lo coyuntural. Se han dirigido a lo sistemico, a lo
esencial. Han comenzado a desmitificar uno de los instrumentos mas sacrosantos de la
economia no solo en Puerto Rico, sino en todo el planeta. Nos referimos al Producto
Nacional Bruto (PNB). Oesde que se comenzo a crear, a partir de los trabajos del
economista Simon Kuznets despues de la depresion de los alios 30, principalmente
como instrumento de las potiticas economicas Keynesianas adoptadas por el gobierno
de Roosevelt antes, durante y despues de la Segunda Guerra Mundial,
el PNB se
convirtio en los Estados Unidos en el indicador por excelencia para medir la salud de la
economia. Su uso se generalizo despues de la guerra a practicamente todos los paises
del mundo.
No deberia extraliarnos que el mundo entero adoptara el PNB como el indicador
economico principal. Esto es una consecuencia logica de la exportacion del modelo
economico norteamericano al resto de los paises del mundo. Las bases de ese modelo
fueron establecidas claramente por el presidente Truman en su discurso inaugural el
20 de enero de 1949. Segun Truman, la meta de todos los paises del mundo tenia que
ser la del desarrollo economico. Asi, de golpe y porrazo, toda la diversidad y riqueza
historica, cultural y material del 95% de los ciudadanos del mundo quedo reducida,
parafraseando a Wolfgang Sachs, investigador del desarrollo del Instituto Wuppertal en
Alemania, a una simple, inflexible y homogeneizante categoria: los subdesarrollados.
La carrera se dirigia al desarrollo, hacia el lugar en donde ya estaban algunos paises
privilegiados que, por haber conseguido hacer crecer su produccion hasta ciertos
umbrales, se habia separado del resto de los mortales.
IV
El PNB era, pues, el indieador perfecto para medir desarrollo porque, siendo
una medida del agregado de la produccion de bienes y servicios, podia usarse para
medir el crecimiento de esta y por ende de la economia. El crecimiento economico era
la medida del desarrollo y este era necesario para sacar a los paises subdesarrollados
de los avatares de la pobreza. El silogismo es impecable y su conclusion inevitable:
para salir de la pobreza hay que hacer crecer el PNB.
Aunque el discurso del presidente Truman marca la era oficial del moderno
empuje hacia el desarrollo economico mundial, el concepto ni era nuevo ni su proceso
de implantacion comenzo en esos momentos. En julio de 1944, trece meses antes de la
rendicion de Japan, 730 delegados del bloque de los aliados se reunieron en Breton
Woods, New Hampshire para crear el Fondo Monetario Internacional y el Banco Mundial
a fin de regir los procesos financieros necesarios para implantar el modelo economieo
una vez concluyera la guerra. Con ella comenzo una nueva carrera hacia el desarrollo
economieo basado en el crecimiento de la produccion y por consiguiente del consumo.
La carrera por el crecimiento de la economia no solamente no ha cesado, sino
que, alimentada por las nuevas reglas impuestas por la globalizacion, se ha
intensificado. 5i usamos el producto bruto como la medida de nuestro progreso, no hay
duda de que hemos sido muy exitosos. Entre 1950 y el 2000, el producto bruto mundial
se multiplieo por 7 ($ del 1996). No obstante, este aumento se ha conseguido a un
costa que como los doctores Alameda y Rodriguez demuestran, no se refleja en el
PNB.
De manera sucinta pero precisa, y citando algunos de las autoridades a nivel
mundial sobre el tema, como es el caso del Dr. Herman Daly, ex economista del Banco
Mundial,
nuestros autores van preparando su caso. El PNB no es un indicador
adecuado para medir el bienestar y debe ser sustituido por uno que incluya los costos,
especialmente las externalidades, de producir nuestros bienes y servieios. Un nuevo
indicador debe ser usado, afirman: "uno que tome en cuenta tanto los efectos
positivos como negativos del crecimiento". Esta es una contribucion a la comprension
de nuestra realidad economiea que no solamente no debe subestimarse, sino que no
debe pasar desapercibida para ningun sector de nuestra sociedad, si es que queremos
salir de la crisis en que nos encontramos.
v
Para los que hemos dedicado nuestras vidas a buscar modelos para conseguir la
sostenibilidad de nuestro pais, el PNB, habia ido perdiendo su aura de mandamiento
del evangelio economico para irse convirtiendo en un asfixiante dogma que impedia a
sus creyentes ver la realidad. Para mi la imagen ha ido deteriorandose como aquel
famoso retrato de Dorian Grey, hasta que ha llegado a cubrirse de un aire de
perversidad que es cada vez mas irrespirable. Puede sonar fuerte pero, como se le
puede llamar a un indicador que le da mas valor a la enfermedad que a la salud; al
crimen mas que a la generosidad; a la destruccion de los recursos naturales mas que a
su conservacion. iCree que estamos exagerando? Lean ellibro de los doctores Alameda
y Rodriguez. En estos momentos, El Yunque no aporta nada a nuestro producto
nacional bruto, sus aportaciones, que no se venden y compran en el mercado, no
existen para efectos de la economia. Pero si a algun genio se le ocurriera derribarlo y
quemarlo para convertirlo en carbon nuestro PNB creceria, por tanto quemar nuestros
bosques es bueno para la economia. Asi mismo los dineros que gastamos en medicos,
en abogados, en prisiones aumentan nuestro PNB. Asi que, el crimen, el cancer y los
divorcios son buenos para la economia. iNo es eso realmente perverso?
Lo interesante y preocupante es que esa verdad tan evidente para los que
trabajamos la sostenibilidad desde las ciencias naturales donde el entorno fisico y sus
leyes establecen limites que tienen que respetarse so pena de que seamos aniquilados,
es practicamente imposible de ver por los economistas. Aqui reside la mas grande
contribucion de estos dos distinguidos economistas, haberse atrevido a examinar y
cuestionar lo que hasta ahora ha sido incuestionable en su profesion. No conozco a la
Ora. Rodriguez pero conozco y he trabajado con el Dr. Alameda. La primera vez que
hablamos con sobre el asunto del crecimiento economico y el PNB fue hace varios aiios
en Carolina durante la asamblea anual de la Sociedad de Planificacion de Puerto Rico.
En aquella ocasion cuatro distinguidos economistas y un sociologo presentaban sus
analisis y propuestas para salir de la crisis economica de entonces. Alli cuestionamos
las recetas de los cuatro economistas que estaban todas predicadas sobre el consabido
crecimiento de la economia.
No solamente el Dr. Alameda coincidia con sus colegas, sino que su respuesta a
nuestro cuestionamiento fue la mas severa. Hace muy poco nos confeso que penso que
era una locura lo que le estabamos planteando. Despues de eso coincidimos en varias
VI
ocasiones y volvimos a hablar del tema varias veces, en esas ocasiones sin la presion
que supone hablar en publico. Finalmente, trabajamos juntos en la crea,cion del Plan
de Desarrollo Socioeconomico del Proyecto Enlace del Cano Martin Pena. Alli pudimos
por primera vez hablar con calma, pero sobre todo, con mas confianza. La confianza
de habernos visto muchas veces, de ver que nuestras posiciones aunque diferentes no
eran irracionales, de darnos cuenta de que ambos desde nuestras perspectivas
queriamos lo mejor para Puerto Rico. Alli hablamos de Herman Daly y Kenneth
Boulding y de los Limites del Crecimiento del Club de Roma. Lo demas es historia.
Nuestro pais se encuentra en una de las mas severas crisis de su historia. Esta,
distinta a las demas, no es solo nuestra crisis; es la crisis del planeta y no es, como
piensan algunos, una crisis coyuntural que vamos a resolver con un parche aqui y otro
alla. Esta crisis es sistemica, estructural y requiere reformas trascendentales de tal
magnitud que no pueden ser menos que una revolucion. Tenemos que cambiar
nuestros paradigmas y eso va a requerir una gran dosis de valentia y de humitdad.
Estos dos distinguidos economistas han demostrado que el crecimiento de la
economia no puede tomarse como progreso, puesto que el bienestar de los
puertorriquenos ha estado deteriorandose mientras el PNB continua creciendo. Esa es
una gran contribucion al esclarecimiento de la causa de nuestros problemas. Pero esa
no es la mayor contribucion. La mayor contribucion es demostrar que si podemos
sentarnos con el otro, el que parece distinto, podemos generar mejores soluciones a
nuestros problemas colectivos. Sobre todo, los economistas tienen que abrir las
puertas de su casa para que entre el aire fresco de las buenas nuevas de la ecologia.
De nuestro lado ha sido muy facit comenzamos a abrirnos a los economistas que
han adoptado enfoques mas holisticos, por eso es que leemos a Herman Daly, a
Kenneth Boulding, a John Stuart Mill, a Georgecu-Roegen y a otros tantos economistas
que han comprendido que la economia se da dentro de una realidad natural que tiene
sus propias leyes que se tienen que respetar. Paradojicamente estos son los mismos
economistas que no son leidos por sus pares. Ese es probablemente el mayor
impedimenta a la solucion de nuestros problemas, la incapacidad de escuchar al otro
al que piensa diferente
0
no esta dentro de nuestro circulo de elegidos. Por ello nos
llena de esperanza el trabajo del Dr. Jose I. Alameda-Lozada y la Ora. Ivonne del C.
Vll
L
Diaz- Rodriguez, economistas y profesores deL Recinto Universitario de Mayaguez, que
han abierto sus oidos y puesto su voz y su inteLigencia aL servicio deL pais. Espero que
su trabajo sea eL comienzo de La conversaci6n muLtisectoriaL e interdisciplinaria que
todos necesitamos para emprender eL camino hacia eL pais justo, democratico,
sostenibLe y feliz que todos queremos.
Juan Rosario, Misi6n Industrial
San Juan, Puerto Rico,
octubre de 2009
Vlll
--_',--~---._~-~---.-~~- --,-"-~,,-~,~---------------------
Resumen Ejecutivo
fndice de Bienestar Econ6mico Sostenible para Puerto Rico
Jose I. Alameda Lozada, Ph.D. & Ivonne Diaz Rodriguez, Ph.D.
Los autores, siguiendo la corriente contemporanea de medicion economica,
ajustada a consideraciones ecologicas, calculan el Indice de Bienestar Economico
Sostenible (IBES) para Puerto Rico, conocido en ingles como Index of Sustainable
Economic Welfare (ISEW). Este indicador surge de una metodologia propuesta para
fines de los 1980 por los economistas ecologicos Herman Daly y Clifford Cobb y el
mismo es contrario a los indicadores tradicionales encontrados en las Cuentas
Nacionales, tales como Producto Interno Bruto
0
Ingreso Nacional. Mediante estos
ultimos se puede medir el crecimiento del ingreso pero no necesariamente el nivel de
bienestar social, enfoque que se pretende lograr mediante elIBES.
r
Un informe europeo del 2009, Report by the Commission on the Measurement of
Economic Performance and Social Progress, dirigido por dos premios Nobel de
Economia, J. Stiglitz y A. Sen, aborda el problema de la medicion del bienestar
economico en los paises. El informe establece que nuevos enfoques en la medicion del
bienestar son mundialmente necesarios pues es tiempo de ir por encima del enfoque
PIB/PNB.
Los autores estiman un tipo de IBES modificado entre el 1970 y 2006, al incluir
partidas tales como el costa del crimen, la cual no se considera en ellBES pero si en el
enfoque del Indice de Progreso Genuino (GPI) (en ingles Genuine Progress Indicator).
Este enfoque puede ser considerado como uno hibrido pues agrega el costa del crimen
al estimado, partida que es consistente con el GPI, pero no con elIBES.
ix
El estudio llega a la conclusion que el nivel de ingreso per capita es superior al
estimado del IBES per capita. En segundo lugar, el crecimiento del IBES per capita es
diferente al PNB real, en especial durante estos ultimos alios. Por ultimo, auscultando
la hipotesis del umbral de Max-Neef entre el crecimiento y el bienestar economico, se
concluye que desde el 1983 el IBES per capita ha estado reduciendose pero no asi el
PNB per capita. De hecho, el IBES per capita se reduce a un ritmo de 1.7% pero el PNB
per capita crece a 1.9%.
Desde principios de la decada de los 1970s, los economistas William Norhaus y
James Tobin (1972) fueron pioneros en presentar la idea de que la medicion tipica
internacional del crecimiento economico
0
desarrollo pasaba por alto los elementos
muy esenciales del bienestar socio-economico, incluyendo, la utilizacion de los
recursos naturales y la calidad del ambiente. Reclamaban estos la necesidad de
desarrollar nuevos esquemas de mediciones fuera del marco de las conocidas Cuentas
Nacionales.
En alios posteriores, los economistas ecologicos Herman Daly y Clifford Cobb
(1989), diseliaron un nuevo modelo de medicion conocido como Index of Sustainable
Economic Welfare, en espaliol, indice de Bienestar Economico (IBES).
Otros enfoques
mas recientes surgen de parte de otros economistas al desarrollar lo que se conoce
como Genuine Progress Indicator (GPI), nuevamente rebasando la idea de que el
producto interne brute no es un indicador de bienestar economico.
El IBES parte de que la relacion entre economia y medio ambiente es compleja y
adquiere dimensiones multiples que no estan consideradas ni medidas en las Cuentas
Nacionales, pero que repercuten en los niveles de bienestar social. EllBES trata medir
el bienestar mediante la introduccion de correcciones a los valores de consumo
personal-- calculados de acuerdo a los procedimientos convencionales--pero tomando
x
en cuenta aspectos como la distribucion del ingreso 0 el valor del trabajo domestico,
el costa de los recursos naturales; en otros, como la perdida
0
degradacion del capital
natural.
A manera ilustrativa podemos mencionar eventos
0
aumentar el producto interno (ingreso nacional) de un pais
situaciones que pueden
0
region, pero no asi el
bienestar economico:
(a)
Un aumento en el numero de personas encarceladas y en la criminalidad
de un pais traen como resultado incrementos en el producto interno
bruto, via el gasto del sistema carcelario, y, el gasto en la inversion de
las empresas en el control de la criminalidad. Estos no constituyen
gastos 0 inversiones que lleven a un mayor bienestar de los residentes;
(b)
El juieio de ex -futbolista y actor de Hollywood, O.J. Simpson aiiadio
$200 millones a la economia de E.U.; pero no signifieD un aumento del
bienestar;
(c)
La explosion de Oklahoma City y la masacre de Littleton generaron un
"boom" a la industria de seguros reflejandose en la economia pues a
raiz de estos incidentes, se aiiaden unos $40 mil millones adieionales a
la seguridad de las escuelas;
(d)
La industria del juego en E.U. es una de amplio auge montando a mas
de $50 mil millones en negocios.
(e)
Los divorcios en Estados Unidos aiiaden $20 mil millones en negocios y
los accidentes de autos unos $57 mil millones, estos influencian el
ingreso y el producto pero no aumentan el bienestar;
(f)
El Calentamiento Global y sus consecuencias aiiaden negocios y
ganancias a los sectores productivos, pero eso no signifiea mas
bienestar;
(g)
El problema de salud de obesidad puede aiiadir negocios a la industria
de dietas y vigilancia del peso-en E.U. unos $32 mil millones por aiio-
Xl
lo que se reconoce en el producto bruto como un beneficio, cuando son
realmente costos para una sociedad;
(h)
Las guerras y otros conflictos pueden estimular el crecimiento del
producto bruto, pero esto no es sinonimo de un aumento en el
bienestar;
(i)
Un pais puede agotar sus recursos minerales, talar sus bosques,
degradar sus suelos, contaminar sus acuiferos y explotar sus recursos
, pesqueros hasta la extincion, y esto aumentaria el ingreso, pero no asi
el bienestar al haberse afectado estos activos hasta su desaparicion.
(j)
La contaminadon, el estres del trabajo, los conocidos "tapones" de
autos, entre otras desamenidades pueden aumentar el gasto de las
empresas, el salario, el consumo de gasolina, etc.; y asi el producto,
pero esto no significa un aumento del bienestar.
Desde entonces, un grupo de paises, ademas de Estados Unidos 1 han estimado
el IBES encontrandose diferencias sustanciales entre el aumento del ingreso
(crecimiento economico) y el bienestar economico. Estos estudios muestran que en la
mayoria de los paises, ambos indicadores tienden a evolucionar de forma paralela
hasta un momento, pero luego comienza a establecerse una brecha sustancial en
donde el crecimiento economico aumenta mientras que el bienestar se reduce.
Este comportamiento es afin con la hipotesis del umbral (Threshold Hypothesis) de
Manfred Max-Neef, la cual establece que r'para cada sociedad que parece estar en un
periodo de crecimiento economico, y que puede mejorar sus indicadores de bienestar,
puede llegar a un punto critico que mas crecimiento se tenga que realizar a expensas
de la calidad de vida, la cual termina deteriorandose".
En el caso de Puerto Rico, los autores siguiendo la metodologia de Daly y Cobb,
calcularon estimados para un tipo de r'IBES modificado", entre el 1970 y 2006. Este
I Entre los paises que se han realizado estudios de IBES son Chile, Austria, Suecia, Alemania, Holanda, Tailandia,
China, Reino Unido, Italia y otros de America Latina tales como Bolivia, Argentina, Colombia, Costa Rica, Ecuador,
entre otros.
xu
enfoque puede ser considerado como uno hibrido pues agrega el costo del crimen al
estimado, partida que es consistente con el GPI, pero no con el IBES. En este estudio
se presenta el estimado realizado del IBES modificado per capita (por persona) y se
compara con el PNB per capita. Al comparar el comportamiento de ambas, observamos
como el nivel de ingreso per capita es superior al estimado del IBES per capita. Por
ejemplo, en el 2006, el valor dellBES per capita fue $2,500 mientras que el PNB real
per capita montaba a $11 ,500.
En segundo lugar, el crecimiento del IBES per capita muestra cambios diferentes al
PNB real, en especial durante estos ultimos anos. La tasa de crecimiento anual
promedio desde el 1970 al 2006 de IBES per capita es -0.71 % mientras el crecimiento
del PNB real es 1.5%.
En tercer lugar, se realiza una comparacion entre el crecimiento y el bienestar
economico, con el proposito de corroborar si la hipotesis del umbral de Max-Neef se
materializa, y al convertir ambos medidores en indices con base de 100 puntos y
l'
utilizando el ano 1970 como base, se nota que desde el 1983, el IBES per capita ha
estado reduciendose pero no asi el PNB per capita. De hecho el IBES per capita se
reduce a un ritmo de 1.7% pero el PNB per capita crece a 1.9%.
En resumen, la medicion del IBES para Puerto Rico constituye un paso de adelanto
para medir si el crecimiento es consono con aumentos en el bienestar de los
residentes.
En este estudio se concluye que el bienestar economico de los
puertorriquenos se ha estado deteriorandose desde principios de los 1980, a pesar de
que la medicion de crecimiento economico, aunque menguada, es desde esta fecha
positiva.
!
t
I
I
Xlll
Executive Summary
Jose I. Alameda lozada, Ph.D.
Ivonne Diaz Rodriguez, Ph.D.
The authors, following the contemporary mainstream economic measurement, fit
to ecological considerations, calculate the Index of Sustainable and Economic Welfare
(ISEW) for Puerto Rico. This indicator arises from a methodology proposed by Herman
ecological economists Herman Daly and Clifford Cobb by the end of 1980's and the
same is in opposition to the traditional indicators found in the National Accounts, such
as ,Gross Internal Product or National Income. By means of these last ones the growth
of the income can be measured, but the level of social welfare is not necessarily
addressed, approach that is being tried to obtain by means of the ISEW.
A recent 2009 European document Report by the Commission on the Measurement
of Economic Performance and Social Progress--conducted by two Economics Nobel
Prizes, J. Stiglitz and A. Sen-- addresses the issue of a proper measure of economic
well-being. The report states that new approaches to measure economic welfare are
worldwide needed because is time to go beyond GOP/GNP accounts.
The authors estimate a type of Modified ISEW between 1970 and 2006, by including
entries such as the cost of crime, which is not considered in the ISEW but it is in the
approach of the Genuine Progress Indicator (GPI). This approach can be considered as
a hybrid one because it adds the cost of crime to the estimate, an entry that is
consistent with the GPI, but not with the ISEW.
The study concludes that the per capita income level is higher than the per capita
ISEW. In second place, the growth of the ISEW per capita is different from the real
National Gross Product (NGP), especially during these last years. Finally, auscultation
XIV
of the hypothesis of Max-Neef threshold between the growth and the economic wellbeing, it is concluded that since 1983 the ISEW per capita has been reducing but not so
the per capita NGP. In fact, the ISEW per capita is being reduced at a 1.7% rate but
the NGP per capita grows at 1.9%.
Since early 1970, economists William Norhaus and James Tobin (1972) were
pioneering
in
presenting/displaying
the
idea
that
international
the
typical
measurement of the economic growth or development ignored the very essential
elements of the socioeconomic well-being, including, the use of the natural resources
and the quality of the environment. They claimed the necessity to develop new
measurement schemes outside the frame of the known National Accounts.
In later years, ecological economists, Herman Daly and Clifford Cobb (1989),
designed a new model of measurement known as Index of Sustainable and Economic
Welfare. More recent approaches arise from other economists by developing what is
known as Genuine Progress Indicator (GPI), again exceeding the idea that the internal
gross product is not an indicator of economic well-being.
The ISEW starts off from the fact that the relation between economy and
environment is complex and acquires multiple dimensions that are not considered nor
measured in the National Accounts, but that they have a repercussion in the levels of
social welfare. The ISEW intends to measure the well-being by means of the
introduction of corrections to the values of personal consumption-- calculated
according to the conventional procedures--but taking into account aspects like the
distribution from the income or the value from the domestic work, the cost of the
natural resources; in others, like the loss or degradation of the natural capital.
To illustrate we can mention events or situations that can increase the internal
product (national income) of a country or region, but not the economic well-being:
xv
(a) An increase in the number of jailed people and the criminality of a country
brings as a result increases in the gross internal product, via the cost of the
prison system, and, the cost in the investment of the companies in the control
of the criminality. These do not constitute expenses or investments that yield
to a greater well-being of the residents;
(b) The trial of ex- soccer player and actor of Hollywood, O.J. Simpson added $200
million to the U.S. economy; but it did not mean an increase of the well-being;
(c) The explosion of Oklahoma City and the massacre of Littleton generated a
r'boom" to the industry of insurances being reflected in the economy as a result
of these incidents, added about $40 additional billion to the security of the
schools;
(d) The industry of the game in United States is one of ample height mounting to
more than $50 billion in businesses.
(e) The divorces in the United States add $20 billion in businesses and the car
accidents about $57 billion; these influence the income and the product but do
not increase the well-being;
(f) The Global Warming and its consequences add to businesses and gains to the
productive sectors, but that does not mean more well-being;
(g) The health problem of obesity can add businesses for about $32 billion per year
to the industry of diets and monitoring of weigh in U.S, -that is recognized in
the gross product as a benefit- when they are really costs for a society;
(h) The wars and other conflicts can stimulate the growth of the gross product, but
this is not synonymous of an increase in the well-being;
(h) A country can exhaust its mineral resources, destroy its forests, degrade its
grounds, contaminate its aquifers and exploit its fishing resources until the
extinction, and this would increase the income, but not the well-being as these
assets were affected to its disappearance.
(j) The contamination, the stress of the work, the well-known traffic jams, among
other obstacles can increase the cost of the companies, the wage, the
consumption of gasoline, etc.; and thus the product, but this does not mean an
increase of the well-being.
Since then, a group of countries, in addition to the United States ill have
estimated the ISEW finding substantial differences between the increase of the income
(economic growth) and the economic well-being. These studies show that in most of
the countries, both indicators tend to evolve in a parallel form until a point, but
XVi
soon
begin to enact a substantial gap where the economic growth increases whereas the
well-being is reduced.
This behavior is compatible with the Threshold Hypothesis from Manfred Max-Neef
that establish that "for each society that seems to be ;n a period of economic growth,
and that can improve its well-being whkh can arrive at a critkal point in which more
growth must be made ;n jeopardy of the quaUty of Ufe, which ends up deteriorating
itself"·
In the case of Puerto Rico, the authors, following the methodology of Daly and
Cobb, calculated estimates for a type of "Modified ISEW", between 1970 and 2006.
This approach can be considered as one hybrid because it adds the estimated cost of
crime, entry that is consistent with the GPI, but not with the ISEW. In this study we
compare the modified per capita ISEW with the GNP per capita. We observed how the
per capita income level is higher than the estimated per capita ISEW. For example, in
the 2006, value of the per capita ISEW was $2,500 whereas the real NGP per capita
mounted to $11,500.
In second place, the growth of the per capita ISEW shows changes different from
the real GNP, in special during the last years. The rate of average annual growth from
the 1970 to 2006 of per capita ISEW is -0.71 %while the growth of the real GNP is 1.5%.
In third place, a comparison is made between the growth and the economic wellbeing, in order to corroborate if the hypothesis of the threshold of Max-Neef it is
materialized. Both measures were converted to indexes with a 100 points base, and
using year 1970 as a year base, we noted that the per capita ISEW has been reduced
but not so the GNP per capita since 1983. In fact the per capita ISEW is reduced at a
1.7% annual rate but the PNB per capita grows at 1.9%.
XVll
In summary, the measurement of the ISEW for Puerto Rico constitutes an advanced
step to determine if the growth is in line with an income in the well-being of the
residents. In this study it is concluded that the economic well-being of the Puerto
Ricans has been deteriorating since the beginning of the 1980 decade, the
measurement of economic growth, although diminished, has been positive.
XVlll
Jose Israel Alameda Lozada, Ph.D.
I.
Ivonne del C. Diaz Rodriguez, Ph.D.
Introduction
During the last decades, the great transformation of the global economy has
dramatically increased the production of goods and services, as well as worldwide
standards of living.
Countries have searched for a better quality of life through
more economic growth, using increases in production as a measure of welfare.
More economic growth has been perceived as a signal of a strength and robust
economy.
However, increases in production and more economic growth do not
necessarily translate into a better quality of life or economic welfare.
According to the Max-Neef's hypothesis (Max-Neef, 1995),
ft •••
for each society
that seems to be ;n a period of economic growth, and that can improve its wellbeing which can arrive at a critical point ;n which more growth must be made ;n
jeopardy of the quaUty of Ufe, which ends up deteriorating itself". For example,
climate change, caused in part by human activities (IPCC, 2007), impose enormous
economic, social, and environmental costs (Stern, 2006).
According to Stern
(2006), increases in temperature could reduce global production between 3% and
20%,
and the consumption per capita could be reduced by nearly 20%.
Furthermore, rising sea levels could displace nearly 200 millions of people around
the world and prompt the extinction of around 40% of animal species.
China's economic boom is a relevant example of the effects of increasing GDP
on the country's quality of life. After the 1978's economic liberalization reforms,
China's GDP has grown an average of 10%, becoming the second largest economy in
the world with an annual GDP of over $7 trillion during 2007.
Economic reforms
have amazingly transformed the Chinese economy, raising the standards of liVing of
several hundred million people. However, the quality of life of millions of people
is being jeopardized by severe environmental and health problems arising from the
country's new economic riches; turning China's new riches into "China's growing
pains".
Seventy five percent of the country's energy comes from coal, carrying about
19 million tons of sulfur dioxide a year. Consequently, coal burning and industrial
activities are generating high levels of air and water pollution. More than 700,000
people die a year due to indoor air pollution; respiratory diseases cause nearly a
quarter of all deaths in the countryside; and nearly 700 million people drink water
contaminated with human and animal waste, causing liver, stomach, and
esophageal cancers.
Hence, "China may be getting richer as it turns into the
workshop of the world, but as Beijingers rich and poor admit, what good is money
if you can't breathe the air?" (Becker, 2004).
Likewise, countless events that may increase a country's gross domestic
product (GOP), but that do not necessarily translate into a better quality of life,
can be mentioned.
For example, natural resource exploitation and degradation,
air and water pollution, global warming and climate change, workplace and family
stress, vehicular and urbanization congestion, obesity, criminality, and wars,
among others, generate income and profits for certain economic sectors, but those
activities do not constitute an increase in society's welfare or quality of life.
In
fact, those activities, instead of benefits, are costs from the point of view of the
whole society. In spite of that, conventional economic measures, such as GOP, do
not consider those costs in their welfare calculation,
but the benefits.
Consequently, GOP, as a welfare measure is incomplete and inefficient, since it
only accounts for the value of goods and services produced and sold within the
economy.
Therefore, GOP ignores economic, social, and ecological costs that
influence welfare and the quality of life.
2
The Max-Neef's hypothesis has been validated in developing and industrialized
countries as well, using the Index of Sustainable Economic Welfare (ISEW).
This
index was originally developed by ecological economists Herman Daly and Clifford
Cobb in 1989. The ISEW incorporates sustainability indicators not considered in
GOP, such as global warming, depletion of non renewable resources, costs of
environmental pollution, costs of congestion, and the costs of urbanization, among
others.
The results of a modified ISEW model for Puerto Rico do not differ from the
international evidence. While GOP per capita has experienced an increasing trend
during the last two decades, the quality of life has being rapidly jeopardized.
Consequently, more economic growth, after the "critical point", is costly and has
negative repercussions in our economic, social, and ecologic welfare.
In other
, words, economic growth can become "uneconomic", where the costs of growth
surpass its benefits.
Sustainable development, preached as the new economic paradigm of the XXI
century, is just another fashionable term used by politicians and policymakers. In
reality, the economic instruments used to measure welfare seriously contradict the
sustainable development discourse.
After fifty (50) years, a critically inefficient
measure of welfare is still in use, leading to erroneous policies, and, in turn, posing
increasing social, economic, and environmental costs.
As a result, it is important to reevaluate traditional measures of welfare, such
as GOP, and to include, not only the benefits of economic growth but also its costs.
The ISEW model for Puerto Rico provides a starting point for the development of
new economic, social, and environmental strategies.
Likewise, it provides the
foundation for evaluating if society is moving in the right direction and a tool for
measuring true sustainable development; development that embrace and integrate
socio-economic aspects with environmental issues. Human needs, actions and
3
ambitions are not isolated to the environment; rather they are connected. If any
society is willing to pursue a sustainable development approach, it must refocus its
social
progress
by
reducing
deprivation
and
inequalities,
and
protecting
environmental resources.
A.
Conventional Measure of Economic Growth
A.1 National Income and Product Accounts (NIPA) and the Gross Domestic
Product
Following the Great Depression, there was a growing need for understanding
the operations of world economies.
In 1929, in an attempt to recognize the
Depression's economic consequences, the United States Department of Commerce
(USDC) hired economist Simon Kuznets, who was an influential theoretician of
economic growth, as an adviser to the National Bureau of Economic Research
(NBER).
In 1934, following Kuznets' report, the USDC issued the first series of
national income statistics by industry of origin and by type of industry (Marcus and
Kane, 2007).
Gross National or Domestic Product (GNP or GDP) figures--the other side of the
national income equation--came later in 1942, basically to answer the questions
raised by President F.D. Roosevelt about the social and economic costs of World
War II (Economic Mobilization Program).
However, the whole economic picture
was not completed until 1947 when a double-entry accounting system was
published, and then after known as the National Income and Product Accounts
(NIPA's). Using this framework, major transactions made by households, business,
government, and the rest of the world, were then classified and recorded as a
main indicator of aggregate economic activity (Marcus and Kane, 2007).
In the United States, GNP statistics were developed during the first half of the
twentieth century, as a response to the growing demand for understanding the
economic and social implications of World War II--Economic Mobilization Programs.
The GDP was created as a measure of the market value of the production of all
4
goods and services within the economy, during a specific interval of time, generally
a year.
National Accounts can be determined in two ways, Le. the income
approach and the expenditure approach.
Using the income approach, GDP is
determined by totaling the various income shares of the factors of production,
while under the expenditure approach the current value of production is
determined by totaling all expenditures for final goods and services in the economy
(Stewart, 1974).
For more than fifty years, countries have pursued well-being and quality of life
through more economic growth, as measured by changes in GDP. GDP became the
main policy goal and the most widely used welfare measure around the world,
including prominent international financial agencies such as the World Bank and
the International Monetary Fund. A growth in GDP was seen as a sign of a strong
market and therefore a strong economy, and if the market performs well, the
society would also benefit (Daly and Cobb, 1989) with improvements in economic
welfare.
However, this argument appears to be weak since GDP measures only
economic welfare, Le., the value of market goods and services produced and
consumed within the economy, not total welfare (Daly and Farley, 2004). In 1974,
Kenneth Stewart wrote:
"A growing GNP ;s generally associated with expanding opportunities
for employment and an increasing amount of material welfare.
Economic policy facilitating GNP growth ;s formulated, ;n part, as a
means of reducing both unemployment and poverty. But a growing
GNP has also been accompanied by urban decay and pollution, which
are not accounted for ;n national income data. "
It is therefore obvious that a great number of factors, Le., psychological,
sociological, and ecological, (Daly and Farley, 2004), were not considered by
conventional economic measures, but all of them, contributing to the well-being
and the quality of life of the society (Jackson and McBride, 2005). This means that
increasing economic growth has associated increasing social, economic and
environmental costs that reduces total welfare such as increasing inequality,
5
stress, congestion, pollution, pollution-induced health problems, loss ofa host
environmental services and the ability of the ecological system to contribute to
human welfare.
In view of this, several alternative measures of welfare were
developed to remedy the measures used to determine GOP.
Three of these
measures are examined and used in the determination of the Index of Sustainable
Economic Welfare (ISEW) for Puerto Rico, 1. e., the Measure of Economic Welfare
(MEW) by Nordhaus and Tobin (1972), the Index of Sustainable Economic Welfare
(ISEW), and the Genuine Progress Index (GPI).
B.
Alternative Measures of Economic Welfare
B. 1
Measure of Economic Welfare (MEW)
The study led by Nordhaus and Tobin (1972) was the first answer to the
increasing criticism leveled against GNP.
Although they did not question the
usefulness of GNP as a measure of production, they did question its usefulness in
evaluating the growth of economic welfare (Stewart, 1974).
"An obvious shortcoming of GNP is that it is an index of
production, not consumption. The goal of economic activity, after
all, is consumption. Although this is the central premise of
economics, the profession has been slow to develop, either
conceptually or statistically, a measure of economic performance
oriented to consumption, broadly defined and carefully calculated.
We have constructed a primitive and experimental 'measure of
economic welfare' (MEW), in which we attempt to allow for the
more obvious discrepancies between GNP and economic welfare",
(Nordhaus and Tobin, 1972)
The Nordhaus-Tobin Measure of Economic Welfare (MEW) included three types
of adjustments: "reclassification of GNP expenditures as consumption, investment,
and intermediate; imputation for the services of consumer capital, for leisure, and
for the product of household work; and correction for some of the disamenities of
urbanization". Using data between1929-1965, they found a positive correlation
between the GNP and the MEW.
However, the relation was somewhat deficient
since the MEW did not account for environmental costs (Daly and Cobb, 1989).
6
B.2
Index of Sustainable Economic Welfare (ISEW)
After Nordhaus and Tobin's findings, economists breathed a sigh of relief,
forgot about MEW, and concentrated again on GDP (Daly and Farley, 2004). It was
not until 1989, that the ISEW for the United States was published by Herman Daly
and John Cobbs (1989). The development of this ISEW was based on the need to
incorporate social and ecological indicators that seem to be adversely affected by
the growth of GDP.
They intended to address sustainability and environmental
issues not considered in previous welfare measures (Costanza, et at. 1997). Some
of the factors introduced in the ISEW included distributional inequality, where
personal consumption is adjusted to account for inequalities in the distribution of
income; air, water, and noise pollution data; estimates on costs of the loss of
wetlands and farmlands, depletion of nonrenewable resources, commuting,
urbanization, auto accidents, advertising, long-term environmental damage, and
the cost of ozone depletion. The summarized ISEW formula can be expressed in
the following equation:
ISEW = Cadj.+ NPE + G + W -DPE -EC -DEC
Where
Cadj. = consumer s pending adjusted for income inequality
NPE = non - defensive public expenditures
G = growth in capital and net change in int ernational position
W
= non - monetarised contributions to welfare
DPE = defensive private expenditures
= cos ts of environmental deg ratation
DEC = depreciation of environmental capital base
EC
Daly and Cobb (1989) found that GNP per capita and ISEW followed similar
trends until the 1970's. However, after the 1970's, the ISEW began to level out
and took a declining path. They also found that the positive correlation between
7
GNP and MEW decreased dramatically from 1947 to 1965. Furthermore, Daly and
Farley (2004) observed that:
"..... if one takes only the latter half of the Nordhaus- Tobin time
series (i.e., the 18 years from 1947 to 1965), the positive
correlation between GNP and MEW faLLs dramaticaLLy.
This
suggests that GNP growth at this stage in the U.S. history may be
quite an inefficient way of improving economic welfare-certainly
less efficient than in the past. "
Following Daly and Cobb (1989), many studies, subjected to certain revisions,
were conducted to determine the ISEW for many countries and regions around the
world, such as the United Kingdom (Jackson 8: Marks, 1994), Austria (Stockhammer
et al., 1995), Scotland (Gill 8: Moffat, 1995), Germany (Diefenbacher, 1995),
Netherlands (Instituut voor Milieu en Systeemanalyse, 1995), Sweden (Jackson and
Styme, 1996), Australia (Hamilton, 1997), Italy (Guenno and Tiezzi, 1998), Chile
(Castaneda, 1999), Wales (Mathews et al., 2003); Thailand (Clarke 8: Islam, 2004),
Province of Siena, Italy (Pulselli et al., 2006), Thailand (Clark and Islam, 2005) and
Belgium (Bleys, 2006).
Castaneda (1999) developed ISEW estimates for twelve
Latin American countries, including the island of Barbados.
B.3
Genuine Progress Indicator (GPI)
In 1995, the GPI was created, in another attempt to measure economic
progress. The GPI is a variant of ISEW and uses the same accounting framework as
the GDP.
However, the GPI adds household's economic contributions and
volunteer work, and subtracts factors such as crime, pollution, and divorce
(Talberth, Cobb, and Slattery, 2007). The GPI attempts to measure welfare
equivalent income, sustainable income, and net social profit. Welfare equivalent
income refers to "psychic income" or welfare associated with consumption. In this
case, harmful aspects of consumption are removed by adding or subtracting
positive and negative externalities associated with consumption.
Sustainable
consumption refers to Hicksian income, which is defined as the maximum income
the individual can consume during a week, and "still expect to be as well off at the
8
end of the week as he was at the beginning" (Hicks, 1948).
Depreciation of
manufactured and natural capital and other defensive expenditures against the
unwanted effects of economic growth were deducted from GDP.
According to
Talberth, et al. (2007), net social profit "is a measure of policy effectiveness and
an
expanded form of cost-benefit analysis that uses sustainable income rather
than GDP", thereby providing a "measure of the welfare or sustainability
implications of policy changes".
The 2006 GPI for the United States included the following variables: personal
consumption, an income distribution index, weighted personal consumption, the
value of household work and parenting, the value of higher education, the value of
volunteer work, services of consumer durables, services of highways and streets,
the cost of crime, loss of leisure time, cost of underemployment, cost of consumer
durables, cost of commuting, cost of household pollution abatement, cost of
automobile accidents, cost of water pollution, cost of air pollution, cost of noise
pollution, loss of wetlands, loss of farmlands, loss of primary forests and damage
from logging roads, depletion of nonrenewable energy resources, the costs of
damage by carbon dioxide emissions and of ozone depletion. In addition to the GPI
for the United States, estimated by Talberth et al. 2007 (2007), it was also
calculated for Vermont (Costanza, et al. 2004), China (Wen, et al. 2007), and
Australia (Hamilton, 1999).
C.
The Max-Neef Threshold Hypothesis of Welfare versus Economic Growth
It has been argued that economic growth is good for the environment, that
exists an empirical relation between per capita income and some measures of
environmental quality,
and
that as income goes
up there is increasing
environmental degradation up to a point, after which environmental quality
improves (Arrow, et al. 1995). However, these arguments have been challenged by
the Max-Neef's threshold hypothesis. According to Max-Neef (1995), ISEW analyses
9
in the United States, United Kingdom, Germany, and the Netherlands showed that
economic welfare per capita rises and then began to decline despite continued
growth of per capita GNP.
Max-Neef (1995) also argued that the threshold
hypothesis "may reveal the existence of a point in a country's economic evolution
where
quantitative
development".
growth
must
be
metamorphosed
into
qualitative
Accordingly, economic growth does not necessarily improve
welfare and lead to a better quality of life.
During the last two decades, several studies at the international level found
increasing discrepancies between GDP and ISEW per capita (Bleys, 2005).
Bleys
claims that the difference may be explained by an increasing income inequality,
rising costs of resource depletion, and long-term growing environmental costs.
Some studies did show that during the 1980's and 1990's, economic welfare leveled
off or started to decline in most countries, consistent with the Max-Neef Threshold
Hypothesis (Bleys, 2005).
Castaneda (1999), using the Daly and Cobb (1989)
methodology, developed an ISEW to study the relationship between economic
growth and welfare in Chile, and found that between 1965-1995, strong economic
growth was mainly due to the export of natural resources. Furthermore, as GDP
failed to account for the loss of natural capital and non-marketed services,
economic growth increased up to a point, where welfare halted and began to
decline, due to severe losses in natural resources.
Clarke and Islam (2005) also used an ISEW to study the welfare effects of
economic growth in Thailand and found that significant increases in economic
growth between 1975 and1999 led in a reduction of absolute poverty and an
increasing level of economic welfare.
However, it was shown that, at a given
point, economic growth resulted in diminishing and negative welfare returns
mainly because of the hidden costs associated with more growth.
10
D.
The ISEW and the Pursuit of Sustainable Development
Sustainable development is defined as the ability of the society to pursue a
high
level
of
contemporaneous
social
progress
that
ensures
generations without
the
compromising
current
the
needs
ability
of
the
of future
generations to meet their own needs. Sustainable development must embrace and
integrate socio-economic aspects with environmental issues. Human needs, actions
and ambitions are not isolated to the environment; rather they are connected. If
society is willing to pursue a sustainable development approach, it must refocus its
social
progress
by
reducing
deprivation
and
inequalities,
and
protecting
environmental resources.
The Index of Sustainable and Economic Welfare (ISEW) is an indicator to
properly measure sustainable development, since GDP takes no account of
increasing inequality, pollution or damage to people's health and the environment.
GOP treats crime, divorce and other elements of social breakdown as economic
gains. In effect, several studies, using the ISEW, show that economic growth does
not necessarily translates into increased welfare and quality of life. The ISEW was
originally designed and estimated, because continued reliance on GOP was often
justified by the lack of any concrete alternative and on the belief that there was
no a valid way to approximate the value of social and environmental factors in
economic terms.
This mainstream model of 'progress', that measures economic
progress using only GDP, is cheating on all of us and future generations. Progress
must be redefined, and GOP must be replaced with new welfare indicators, which
measure how our national policies truly deliver a better quality of life for all.
11
E.
The Needs of ISEW Accounts for Puerto Rico
Since the inception of the Puerto Rico's economic development program, in the
1950's, the economy of Puerto Rico has experienced an incredible success in the
socio-economic transformation of the Island. Traditional figures of growth has
shown that the real gross domestic product (GOP) per capita soured from $383 in
1950 (1954=100) to $2,841 in 2006.
As well, the life expectancy, fertility and
death rates, school attendance ratio, and other social indicators of well-being had
also reached a significant level of achievement when compared to other
counterparts of Latin America and the Caribbean countries.
Despite this achievement, there is a general feeling among many local social
scientists that the quality of life in Puerto Rico has consistently deteriorated during
the same period of time. This deterioration is demonstrated by a variety of socioeconomic losses including a sizable increase: in the rate of criminal activity, the
high rate of construction activity that led to the virtual disappearance of farmland
and production in the agricultural industry, and the prevalence of narcotic use,
mainly among youth members of society.
In other words, the transformation
resulted in a high level of economic growth that was not fully transferred to
significant improvement in quality of life.
Sustainable development, preached as the new economic paradigm of the XXI
century, is just another fashionable term used by politicians and policymakers. In
reality, the economic instruments used to measure welfare seriously contradict the
sustainable development discourse.
After fifty (50) years, a critically inefficient
measure of welfare is still in use, leading to erroneous policies, and, in turn, posing
increasing social, economic, and environmental costs. In order to account for the
positive and negative consequences of economic growth, especially those that
hinder society's quality of life, and to achieve the desired level of sustainable
development and a better quality of life, an Index of Sustainable Economic Welfare
12
must be used. Other indexes have been developed in order to fulfill better
standards of measuring the quality of life.
In this study an attempt is made to develop, for the first time, an Index of
Sustainable Economic Welfare (ISEW) for the economy of Puerto Rico during the
year period of 1970 to 2006. The model followed the original and revised ISEW by
Daly and Cobb (1989, 1994) and includes variables from the Genuine Progress
Indicator (GPI) , among which the cost of crime figures prominently, since it is
probably the most formidable social problem currently faced in Puerto Rico. Under
conventional welfare measures, the cost of crime is counted as a contributor to
economic growth, since anti-crime expenditures could contribute to an increase in
economic well-being. In the case of ISEW and GPI, crime expenditures or income
derived from such activities are considered a cost rather than a benefit.
The
model also incorporates the costs of commuting, the costs of personal pollution
control, automobile accidents, air and water pollution, the loss of natural habitats
and farmlands, the depletion of non-renewable resources, and climate and ozone
depletion. Using the Max-Neef Threshold Hypothesis, research is focused on the
relationship between economic growth, as measured by GDP, and quality of life.
13
II.
Building the ISEW Accounts for the economy of Puerto Rico
The main framework used to construct the Index of Sustainable Economic
Welfare (/SEW) for Puerto Rico and their corresponding adjustments is based upon
the procedures developed by Daly Cobb (1989, 1994) for the United States ISEW).
The Index also includes the cost of crime originally calculated by the Genuine
Progress Indicator (GPI) (see Box 1). All the monetary figures were converted to
real terms by adjusting to inflation through the 2000 implicit price index based
upon the United States dollars base.
The ISEW accounts or particular items are
deflated by applying different implicit deflators.
Box 1
The Index of Sustainability and Economic Welfare (ISEW)
Items and Column legends
Column A: Year
Column B: Personal Consumer Expenditures (PCE)
Column C: Income Inequality
Column D: Adjusted Consumer Expenditures
olumn E(+): Services from Domestic Labor
olumn F(+): Services from Consumer Durables
Column G(+): Services from Streets and Highways
Column H(+): Public Expenditure on Health and Education
Column 1(-): Consumer Durables: difference between expenditure and value of
services
Column J(-): Defensive Private Expenditures on Health and Education
Column K( -): Costs of Commuting
olumn L( -): Costs of Personal Pollution Control
olumn M( -): Costs of Automobile Accidents
Column
Column
Column
Column
Column
Column
Column
olumn
Column
N( -): Costs of Water Pollution
0(-): Costs of Air Pollution
P( -): Costs of Noise Pollution
Q(-): Loss of Natural Habitats
R(-): Loss of Farmlands
S(-): Depletion of Non-Renewable Resources
T(-): Costs of Climate Change
U(-): Costs of Ozone Depletion
V(+): Net Capital Growth (in here instead "the Cost of Crime").
Column W(+): Net Change in International Position (omitted).
olumn X: Index of Sustainable Economic Welfare\
Column Y: Per capita Index of Sustainable Economic Welfare
14
The ISEW for Puerto Rico was prepared using data for the fiscal years (JulyJune) 1970 to 2006. The main statistical sources of data were obtained from the
Puerto Rico Planning Board (PRPB), the agency that is responsible for the
calculation of the National Accounts.
Data was also collected from other local
state agencies and documents from the United States Federal Agencies as well as
those of the federal government.
A.
Consumer Expenditure and Income Inequality Adjustment (Columns B
and C).
The supporters of ISEW accounts state that there are a number of difficulties in
using consumption as a welfare index. The assumption is that one unit of
consumption used is much the same as another in terms of delivering welfare. This
argument denied that consumption may offer a diminishing return in terms of
welfare, that is, a higher level of consumption generates a lower level of welfare.
Meanwhile, another pitfall of such an approach is as follows; a given dollar unit of
consumption in good X is equally valued to another dollar of another unit of good
Y, even if the former were a better product. For example, a dollar value of fatanimal- food consumption is equally valued as non-fat calories consumption.
However, the Personal Consumption Expenditure (PCE) is the main welfare figure
for the calculation of the ISEW. It was obtained from the National Accounts,
published annually by the PRPB.
However, the PCE vector is not taken as such on its monetary basis. In order to
adjust the PCE, in response to the effects of unequal distribution of income in the
economy, the traditional approach is followed by adjusting the PCE to income
inequality. The procedure is as follows:
PCE adjusted
where, PCE
= PCE x (1-G)
= Personal Consumption Expenditure (real or nominal)
15
G = Gini Indexes for 1970, 1980, 1990 and 2000
1
Likewise the original studies of ISEW, an index of inequality were used to provide
an adjustment to the welfare measure. The PCE values, once weighted by G, were
deflated by the Implicit Price Index of PCE. The results are shown in Table 1 and
the Graph 1.
B.
Services from Domestic Labor (Column E)
Services from household workers also contribute to economic welfare even
though they are not traded within the market system. GDP figures, generally, do
not include this contribution even though it is important to economic stability,
personal consumption, and improvements in economic welfare.
This study takes into account two main sources of household output: domestic
workers (non-market workers) and regular market workers. According to the 2006
American Time Use Survey
2,
it is assumed that female market workers dedicated
2.7 hours per day in household activities, while men did so at 2.1 hours per day, --a
week of five days. The weighted average is 2.4 hours per day. The non-market
household services are estimated at 7.6 hours per day, for a five day/week. In this
study, household hour worked is valued at a yearly market wage rate. The data for
fiscal year of either domestic and market workers came from the Department of
Labor and Human Resources. These hours were valued by the average wage rate
per hour (AWR), at 2000 prices, and deflated by the implicit price for PCE. The
AWR was computed by dividing the total amount of wages and salaries of the
employees, and then divided by a normalized 2,080 hours per year. Table 2 shows
the imputed value for domestic household services.
1 The Gini Index measures income inequality and their values range from 0 to 1. According
to Segarra-Almestica (2007), although income inequality in Puerto Rico increased
considerably by 1990 to 2000, it decreased from 1970 to 1980.
2 u. S. Department of Labor, Bureau of Labor Statistics. American Time Use Survey-2006
Results: www.bls.gov/news.release/atus.nrO.htm
16
Table 1
Real Personal Consumption Expenditures Adjusted to Income Inequality: 2000 year prices
Col. A
Col B
Col (4) = (1-Col
Col. C
Col. (5)
C)
Year
Personal
Consumption
Expenditures
(PCE) (millions $)
Inequality Index
Gini (G) at
PCE adj = PCE
x (1-G)
(millions $)
Implicit PCE
Price Index
(base =2000)
Col. B
Col. (5)
Real
Adjusted PCE
(millions $)
= Col D
1970
$3,746.5
0.5600
$1,648.5
0.3091
$5,333.0
1971
$4,271.9
0.5552
$1,900.1
0.3215
$5,910.6
1972
$4,736.8
0.5504
$2,129.7
0.3318
$6,417.7
1973
$5,233.5
0.5456
$2,378.1
0.3474
$6,845.1
1974
$5,777.1
0.5408
$2,652.8
0.3865
$6,864.5
1975
$6,472.8
0.5360
$3,003.4
0.4433
$6,775.3
1976
$7,490.0
0.5312
$3,511.3
0.4713
$7,450.3
1977
$8,238.9
0.5264
$3,901.9
0.4879
$7,998.2
1978
$8,887.2
0.5216
$4,251.6
0.5086
$8,358.8
1979
$9,667.2
0.5168
$4,671.2
0.5369
$8,701.1
1980
$10,755.9
0.5120
$5,248.9
0.6034
$8,698.9
1981
$11,898.2
0.5108
$5,820.6
0.6623
$8,788.6
1982
$12,541.5
0.5096
$6,150.4
0.6993
$8,794.4
1983
$13,299.2
0.5084
$6,537.9
0.7206
$9,072.4
1984
$14,063.3
0.5072
$6,930.4
0.7280
$9,519.6
1985
$15,057.4
0.5060
$7,438.4
0.7459
$9,972.7
1986
$15,746.4
0.5048
$7,797.6
0.7487
$10,414.8
1987
$16,794.6
0.5036
$8,336.8
0.7551
$11,040.3
1988
$18,011.7
0.5024
$8,962.6
0.7788
$11,508.3
1989
$18,872.8
0.5012
$9,413.7
0.8069
$11,666.0
1990
$19,827.2
0.5000
$9,913.6
0.8308
$11,932.8
1991
$20,460.7
0.5064
$10,099.4
0.8674
$11,642.8
1992
$21,520.9
0.5128
$10,485.0
0.8795
$11,921.6
1993
$22,818.5
0.5192
$10,971.1
0.8881
$12,352.8
1994
$24,429.6
0.5256
$11,589.4
0.9055
$12,799.0
1995
$25,923.3
0.5320
$12,132.1
0.9139
$13,274.4
1996
$27,831.0
0.5384
$12,846.8
0.9241
$13,901.7
1997
$30,010.8
0.5448
$13,660.9
0.9420
$14,502.2
1998
$31,980.3
0.5512
$14,352.7
0.9613
$14,930.3
$15,512.3
1999
$34,008.0
0.5576
$15,045.1
0.9699
2000
$36,132.6
0.5640
$15,753.8
1.0000
$15,753.8
2001
$37,590.3
0.5704
$16,148.8
1.0301
$15,676.7
2002
$38,844.9
0.5768
$16,439.1
1.0379
$15,838.6
2003
$40,973.4
0.5832
$17,077.7
1.0555
$16,179.4
2004
$43,396.0
0.5896
$17,809.7
1.0720
$16,613.3
2005
$46,299.8
0.5960
$18,705.1
1.1062
$16,909.4
2006
$49,579.4
0.6024
$19,712.8
1.1587
$17,012.8
Sources: Puerto Rico Planning Board of Puerto Rico and Segarra-Almestica, (2007).Gini Indexes are for Census
years of 1970, 1980, 1990 and 2000. Non-Census years were extrapolated using the average rate of growth
between each Census year.
17
$18,000.0
Graph 1
Personal Consumption Expenditures, adjusted at 2000 prices
(figures in millions $, and percentage)
.---------=--=--------:----:....----=--:------,··12.0?lo
$16,000.0 .
1
\
$14,000.0
~
$10,000.0
$8,000.0
11
8.0%
1\
\
$12,000.0
1
10.0%
~
,
I
I
I
I\
I \
I
I
I
6.0%
4.0%
2.0%
$6,000.0
0.0%
$4,000.0
. -2.0%
$2,000.0
- - - p e E Adjusted at 2000 prices
....
Rate of Growth
Source: Table 1
18
Table 2
The Domestic Household Services; Fiscal years 1970 to 2006
CoLA
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Market
HousehoLd
Hours
(thousand)
428,064
436,176
460,512
464,880
464,256
436,176
423,072
431,184
450,528
458,640
469,872
473,616
448,656
438,672
463,632
472,992
484,848
520,416
544,752
591,552
600,912
609,648
609,648
623,376
630,864
655,824
681,408
703,248
710,736
713,232
717,600
713,856
718,848
741,312
752,544
772,512
781,872
CoLE
Non-Market
HousehoLd
Hours
(thousand)
488,342
496,392
509,808
521,435
520,541
544,690
559,000
551,845
563,472
588,515
601,931
609,981
634,130
648,440
642,179
652,912
650,229
638,602
636,813
638,602
687,794
692,266
690,477
688,688
718,203
719,992
724,464
728,936
733,408
740,563
768,290
770,973
760,240
769,184
769,184
755,768
533,957
Average Wage
Rate at 2000
prices
$5.79
$6.20
$6.29
$6.74
$6.58
$6.70
$6.72
$6.84
$6.79
$6.99
$6.66
$6.50
$6.61
$6.68
$6.81
$6.92
$7.02
$7.01
$7.15
$6.89
$7.02
$6.92
$6.91
$7.44
$7.57
$7.66
$7.77
$7.91
$8.02
$8.33
$8.57
$8.71
$8.79
$8.69
$8.93
$8.92
$8.67
ReaL HousehoLd Output
(millons $)
$8,728.0
$9,502.0
$9,976.9
$10,894.8
$10,620.4
$10,992.1
$11,144.5
$11,293.5
$11,514.7
$12,288.9
$11,978.7
$11,843.3
$12,234.0
$12,502.7
$12,825.1
$13,253.1
$13,490.2
$13,537.5
$13,963.6
$13,798.6
$14,884.3
$14,795.2
$14,749.2
$15,966.1
$16,793.6
$17,203.0
$17,724.1
$18,307.3
$18,693.7
$19,580.6
$20,685.6
$21,061.4
$21,080.3
$21,213.8
$21,897.5
$21,795.5
$21,432.9
Source: Department of Labor and Human Resources, and Puerto Rico Planning Board.
C.
Services from Consumer Durables (Col. F)
As part of any figure from the National Accounts, durable consumer goods are
related to the expenditure on consumer durables. These expenditures do not
19
n
represent consumption within the accounting period since durable goods, by its
very nature, can contribute to welfare enhancement in several subsequent time
periods.
Daly and Cobb (1989) argued that the appropriate way to treat the
expenditures of consumer durables is to include them as flow of services during the
accounting period from the given net stock of consumer durables in a year.
On Table 3, ISEW Accounts value the service flows borne from the use of the
stock of consumer durables (column F), which is later subtracted from the
expenditure on durables (Column I). Cobb and Daly (1989) calculated the value of
these services by considering a fixed share (10%) of the annual stock of consumer
durables. Following Daly and Cobb's original approach, the stock of capital was
estimated using the perpetual inventory formula:
K (t) = K (t-1) x (1- d)
+
In (t)
where;
K (t) = capital stock at year t;
d = depreciation rate (=6.5%)
In (t) = investment at time year t,
and;
K (t-1) = capital stock at year t-1
The stock value in 1940 is assumed to be equal to the investment value for that
year, with a nominal value of $16.3 million. A depreciation rate of 6.5% and 10% of
the stock value as flows of service was used. Given these assumptions, the final
value is shown in Table 3.
20
Table 3
Stock of Durable Consumer Goods and Services (millions $); current prices.
Fiscal
Years
Stock of Durable
Consumer Goods
(millions $)
Investment
(millions $)
Flow of services
(10% x Stock)
Difference
between flow and
stock of durable
goods
1970
$3,332.6
$602.1
$333.3
$268.8
1971
3,809.0
693.0
380.9
312.1
1972
4,365.4
804.0
436.5
367.5
1973
4,981.7
900.0
498.2
401.8
1974
5,495.9
838.0
549.6
288.4
1975
5,997.6
859.0
599.8
259.2
1976
6,689.8
1,082.0
669.0
413.0
1977
7,473.0
1,218.0
747.3
470.7
1978
8,389.2
1,402.0
838.9
563.1
647.5
1979
9,434.9
1,591.0
943.5
1980
10,418.6
1,597.0
1,041.9
555.1
1981
11,458.4
1,717.0
1,145.8
571.2
1982
12,295.8
1,582.2
1,229.6
352.6
1983
13,152.0
1,655.4
1,315.2
340.2
1984
14,301.4
2,004.3
1,430.1
574.2
1985
15,643.8
2,272.0
1,564.4
707.6
1986
17,031.9
2,404.9
1,703.2
701.7
1987
18,483.6
2,558.8
1,848.4
710.4
1988
19,949.1
2,666.9
1,994.9
672.0
1989
21,275.5
2,623.1
2,127.5
495.6
1990
22,492.2
2,599.6
2,249.2
350.4
1991
23,443.9
2,413.7
2,344.4
69.3
1992
24,439.0
2,519.0
2,443.9
75.1
1993
25,825.3
2,974.8
2,582.5
392.3
1994
27,375.9
3,229.2
2,737.6
491.6
1995
29,225.7
3,629.3
2,922.6
706.7
1996
31,080.6
3,754.6
3,108.1
646.5
822.6
1997
33,203.4
4,143.0
3,320.3
1998
35,454.4
4,409.3
3,545.4
863.8
1999
37,944.6
4,794.7
3,794.5
1,000.3
2000
40,088.3
4,610.0
4,008.8
601.2
2001
41,964.7
4,482.2
4,196.5
285.7
2002
43,849.0
4,612.0
4,384.9
227.1
2003
45,612.9
4,614.1
4,561.3
52.8
2004
47,395.1
49,827.2
4,747.0
5,512.8
4,739.5
4,982.7
7.5
530.1
$52,320.8
$5,732.4
$5,232.1
$500.3
2005
2006
Sources: Puerto Rico Planning Board and calculations from the authors.
21
D. Difference (Coli - Col F) between Expenditures and the Value of Services·
from Consumer Durables (Col. I)
Another ISEW approach is to compute the difference between expenditures on
consumer goods and the service flowing from these goods during the accounting
period (column F). Needless to say, this type of procedure is not conducted in
National Accounts, but still seems to have some relevance as used by Milton
Friedman in his Permanent Income Hypothesis (PI H). The PIH defines consumption
as "to designate the value of the services that it is planned to consume". For the
purposes of presenting this paper, the difference between the time series service
value and the total consumer expenditures was calculated. The difference was
then deflated using the Implicit Price Index of Durable Consumption Goods (Base
Price at 2000). Table A-4 shows the values of the differences.
E.
Services from Streets and Highways (Col. G)
Government expenditures are included in the ISEW to the extent that they are
non-defensive, and therefore, make a positive contribution to welfare. In general,
public services are considered as defensive expenditures on the grounds that they
do not contribute to the welfare of society. Government expenditures on streets
and highways are deemed non-defensive and some of their services flows do
account to the welfare index.
In this study, the flow of services was determined by equating it to 20% of a
given capital stock of road, highway, school and other public works for each year.
The capital stock follows the perpetual inventory formula with a depreciation rate
of 4.5%. The initial stock value is $6.7 million and is equal to investment
expenditures of fiscal year 1948.
Table 5 indicates the respective estimated
values.
22
Table 4
Consumer Durable Goods
Difference between Expenditures and Services, at 2000 prices; 1970 to 2006.
(Col I)-(Col F)
(Col F).
Fiscal
Year
Flows of Services
(millions $)
Durable
Consumer Goods
Expenditures
(millions $)
1970
$333.3
$602.1
$268.8
0.4031
1971
380.9
693.0
312.1
0.4137
754.3
1972
436.5
804.0
367.5
0.4232
868.3
1973
498.2
900.0
401.8
0.4354
922.9
1974
549.6
838.0
288.4
0.4544
634.8
1975
599.8
859.0
259.2
0.5056
512.7
1976
669.0
1,082.0
413.0
0.5420
762.1
1977
747.3
1,218.0
470.7
0.5661
831.5
1978
838.9
1,402.0
563.1
0.5979
941.8
1979
943.5
1,591.0
647.5
0.6513
994.2
1980
1,041.9
1,597.0
555.1
0.7182
773.0
1981
1,145.8
1,717.0
571.2
0.7817
730.7
1982
1,229.6
1,582.2
352.6
0.7908
445.9
1983
1,315.2
1,655.4
340.2
0.8235
413.1
1984
1,430.1
2,004.3
574)
0.8574
669.6
1985
1,564.4
2,272.0
707.6
0.8794
804.7
1986
1,703.2
2,404.9
701.7
0.8928
785.9
1987
1,848.4
2,558.8
710.4
0.9008
788.7
1988
1,994.9
2,666.9
672.0
0.9246
726.8
1989
2,127.5
2,623.1
495.6
0.9438
525.1
1990
2,249.2
2,599.6
350.4
0.9099
385.1
1991
2,344.4
2,413.7
69.3
0.9347
74.2
1992
2,443.9
2,519.0
75.1
0.9209
81.5
1993
2,582.5
2,974.8
392.3
0.9356
419.3
1994
2,737.6
3,229.2
491.6
0.9524
516.2
1995
2,922.6
3,629.3
706.7
0.9511
743.0
1996
3,108.1
3,754.6
646.5
0.9597
673.7
1997
3,320.3
4,143.0
822.6
0.9740
844.6
1998
3,545.4
4,409.3
863.8
1.0027
861.5
1999
3,794.5
4,794.7
1,000.3
0.9832
1,017.3
Differences at
current price
(millions $)
Implicit Price Index
for Durable Goods
(2000=100)
Real Differences
(2000 prices,
millions $)
$667.0
2000
4,008.8
4,610.0
601.2
1.0000
601.2
2001
4,196.5
4,482.2
285.7
0.9533
299.7
2002
4,384.9
4,612.0
227.1
0.9795
231.8
2003
4,561.3
4,614.1
52.8
0.9951
53.1
2004
4,739.5
4,747.0
7.5
1.0128
7.4
2005
4,982.7
5,512.8
530.1
1.0147
522.4
2006
$5,232.1
$5,732.4
$500.3
1.0162
$492.3
23
Table 5
Capital Stock and Investment in roads, highways, schools and other public works
In millions of dollars (current and 2000 constant prices)
Fiscal Year
Investment in
Roads, Highways,
Schools, and
Other Public
Works
Stock of
Investment
Flow of
Services,
at current prices
Implicit price
deflator Index for
Public
Construction
(2000 =1.00)
Col G.
Flow of Services
at 2000 prices
1970
$145.5
1971
157.1
145.5
$819
0.2432
$336.9
157.1
939.7
0.2562
1972
$366.8
221.3
221.3
1,118.7
0.2762
$405.0
1973
1974
220.2
221.6
220.2
221.6
1,288.5
1,452.1
0.2958
$435.6
0.3382
$429.4
1975
234.4
234.4
1,621.2
0.3878
$418.0
1976
1977
1978
270.5
239.5
270.5
239.5
1,818.7
1,976.4
0.3986
0.4134
$456.3
$478.1
254.6
254.6
2,142.1
0.4522
$473.7
1979
272.0
272.0
1980
265.6
265.6
2,317.7
2,479.0
0.4902
0.5275
$470.0
$472.8
1981
249.4
249.4
2,616.8
0.5989
$436.9
1982
187.9
187.9
2,687.0
0.6468
$415.4
1983
180.1
180.1
2,746.1
0.6691
$410.4
1984
235.8
235.8
2,858.4
0.6808
1985
254.9
254.9
2,984.6
0.6842
$419.8
$436.2
1986
192.8
192.8
3,043.1
0.6840
$444.9
1987
1988
223.9
223.9
0.6895
$454.0
300.2
356.0
300.2
356.0
3,130.1
3,289.4
3,497.4
0.6839
0.7458
$481.0
$468.9
$485.6
1989
1990
391.6
391.6
1991
404.8
510.3
404.8
3,731.6
3,968.5
0.7685
0.7835
510.3
4,300.2
0.8085
4,663.9
4,941.8
0.8457
$551.5
0.8791
1992
1993
557.2
557.2
1994
487.8
487.8
$506.5
$531.9
1995
560.4
560.4
5,279.9
0.9015
$562.2
$585.6
1996
1997
785.7
785.7
5,828.0
0.9207
$633.0
785.6
785.6
6,351.3
0.9401
$675.6
1998
1999
1,007.8
1,007.8
7,073.3
0.9638
$733.9
1,319.2
1,312.3
1,319.2
8,074.2
1,312.3
9,023.1
0.9848
1.0000
$819.9
2000
2001
2002
1,262.2
1,262.2
0.9972
$990.7
988.7
988.7
9,879.3
10,423.5
1.0047
$1,037.5
2003
1,117.5
1,117.5
11,071.9
1.0206
$1,084.8
2004
1,148.0
1,148.0
11,721.6
1.0521
$1,114.1
2005
1,093.4
12,287.5
1.1174
$1,099.6
2006
$1,094.4
1,093.4
1,094.4
$12,829
1.1656
$1,100.6
24
$902.3
F.
Public Expenditures on Health and Education (Col. H)
ISEW studies have expressed that public expenditures on health and education
may contribute either to the physical well-being of the nation by public
consumption, or to building up of the human capital skills base. Some health
expenditures may be purely defensive against activities considered elsewhere in
the economy as consumption. For example, the treatment of smoking-related
illness-also counted as consumer expenditures under any traditional National
Accounts-is
understood to contribute to
human's well
being,
but it is
inappropriate to add such costs as a direct contributor to welfare.
Table 6 shows the estimates of non-defensive public expenditures in health and
education, valued at year 2000 prices. Data on education were taken from the 1990
to 1996 education budget of the U.S. Department of Education; and data from 1997
to 1996 were available at http://www.presupuesto.gobierno.pr. posted by the
Puerto Rico Office of Management and Budget (O{idna de Gerenda y Presupuesto
del Estado Ubre Asodado de Puerto Rico, OGP).
Data from 1970 to 1990 were
extrapolated backward using the annual rate of growth of public expenditures in
education per capita (6.2%) for 1990 to 2006. The current price education
expenditure per capita was $314 in 1990 and $826 in 2006.
The health expenditures were computed by summing up the expenditures of
public agencies expenditures such as the State Department of Health, agencies in
charged of Health Public Reform, the Corporation of Cardiovascular Services, and
the Correctional Agencies health systems. The data from 1997 to 2006 came from
OGP, and for the years 1970 to 1996, the values were extrapolated using an annual
rate of growth of 4.4%.
25
Table 6
Non Defensive Public Health and Education Expenditures
(in millio'ns $, except Implicit price deflator)
Fiscal
Year
Education
Expenditures
Health
Expenditures
Grand Total
Non-Defensive
Expenditures
1970
$305.2
$365.4
$670.7
1971
$325.5
$388.fl
$714.1
1972
$347.2
$413.2
$760.3
1973
$370.2
$439.3
1974
$394.8
$467.1
$335.3
Weighted
Implicit
price
Deflator;
2000 =1.00
0.1953
Col. H
Real Public Nondefensive
Expenditures,
2000 prices
$1,716.7
$357.0
0.2084
$1,713.1
$380.2
0.2223
$1,710.0
$809.6
$404.8
0.2346
$1,725.5
$862.0
$431.0
0.2418
$1,782.2
1975
$421.1
$496.7
$917.8
$458.9
0.2598
$1,766.1
1976
$449.1
$528.2
$977.2
$488.6
0.2923
$1,671.8
1977
$478.9
$561.6
$1,040.5
$520.3
0.3109
$1,673.4
1978
$510.8
$597.1
$1,107.9
$554.0
0.3305
$1,675.9
1979
$544.7
$634.9
$1,179.7
$589.8
0.3524
$1,674.0
1980
$580.9
$675.1
$1,256.1
$628.0
0.3752
$1,673.9
1981
$619.5
$713.1
$1,332.6
$666.3
0.4151
$1,605.4
1982
$660.7
$753.1
$1,413.8
$706.9
0.4502
$1,570.3
1983
$704.6
$795.4
$1,500.1
$750.0
0.4767
$1,573.4
1984
$751.5
$840.1
$1,591.6
$795.8
0.5089
$1,563.8
1985
$801.4
$887.3
$1,688.7
$844.4
0.5286
$1,597.4
1986
$854.7
$937.1
$1,791.8
$895.9
0.5484
$1,633.7
1987
$911.5
$989.8
$1,901.3
$950.6
0.5774
$1,646.5
1988
$972.1
$1,045.3
$2,017.5
$1,008.7
0.6125
$1,647.0
1989
$1,036.7
$1,104.1
$2,140.8
$1,070.4
0.6425
$1,665.9
1990
$1,105.6
$1,166.1
$2,271.7
$1,135.9
0.6632
$1,712.7
1991
$1,209.0
$1,229.3
$2,438.3
$1,219.1
0.6974
$1,748.1
1992
$1,263.5
$1,295.9
$2,559.4
$1,279.7
0.7435
$1,721.1
1993
$1,320.6
$1,366.1
$2,686.7
$1,343.4
0.8013
$1,676.4
1994
$1,456.4
$1,440.1
$2,896.5
$1,448.3
0.8265
$1,752.3
1995
$1,551.4
$1,518.2
$3,069.5
$1,534.8
0.8324
$1,843.7
1996
$1,789.2
$1,600.4
$3,389.6
$1,694.8
0.8579
$1,975.6
1997
$1,850.8
$1,687.2
$3,538.0
$1,769.0
0.8893
$1,989.2
1998
$1,909.6
$1,675.6
$3,585.2
$1,792.6
0.9282
$1,931.3
1999
$2,074.5
$1,794.8
$3,869.3
$1,934.6
0.9621
$2,010.8
2000
$2,397.7
$2,677.1
$5,074.8
$2,537.4
1.0000
$2,537.4
2001
$2,190.3
$2,181.3
$4,371.6
$2,185.8
1.0460
$2,089.7
2002
$2,268.7
$2,310.2
$4,578.9
$2,289.5
1.0817
$2,116.6
2003
$2,697.3
$2,336.1
$5,033.4
$2,516.7
1.1054
$2,276.7
2004
$2,721.1
$2,578.0
$5,299.1
$2,649.6
1.1231
$2,359.1
2005
$3,044.3
$2,760.4
$5,804.7
$2,902.4
1.1422
$2,541.1
2006
$3,244.2
$2,623.4
$5,867.6
$2,933.8
1.1593
$2,530.6
26
To compute the non-defensive expenditures a 50% of total expenditures' were
assumed. The implicit price deflator used to adjust to inflation is a weighted one
between two consumer expenditures- price indexes; medical services and funeral
expenses and education. These implicit price deflators were at 1954 prices. The
1954 price base was changed to a 2000 price base.
G. Defensive Private Expenditures on Health and Education (Col. J)
Private expenditures on education and health, both included in the peE vector,
have to be adjusted to private defensive expenditures. As in the case of public
expenditure, one half of the expenditure on health and one half of the expenditure
on furthering education were taken to be non-defensive consumption expenditures.
Table 7 shows the results.
27
Table 7
Defensive Private Health and Education Expenditures
Millions $, except weighted implicit price deflator
Fiscal Year
Medical Care
and Funeral
Services
(millions $)
Education
Expenditures
(millions $)
Weighted
implicit price
deflator
2000 =1.00
0.195
Col. J
Defensive
Private Health
and Education
2000 prices.
(millions $)
576.7
1970
191.1
34.2
Medical Care and
Education
Expenditures
Total
(millions $)
112.7
1971
238.4
40.5
139.5
0.208
669.1
1972
243.2
50.8
147.0
0.222
661.2
1973
292.8
59.0
175.9
0.235
749.8
1974
322.3
75.0
198.7
0.242
821.5
1975
380.4
92.9
236.7
0.260
910.8
1976
417.0
113.8
265.4
0.292
908.1
1977
492.5
145.5
319.0
0.311
1,026.0
1978
593.1
168.5
380.8
0.331
1,152.1
1979
690.8
189.0
439.9
0.352
1,248.5
1980
725.5
212.8
469.2
0.375
1,250.4
1981
849.5
235.5
542.5
0.415
1,307.1
1982
918.8
266.7
592.8
0.450
1,316.7
1983
1,016.0
305.2
660.6
0.477
1,385.8
1984
1,118.7
334.8
726.8
0.509
1,428.2
1985
1,297.3
361.6
829.5
0.529
1,569.2
1986
1,412.9
398.5
905.7
0.548
1,651.5
1987
1,591.3
434.4
1,012.9
0.577
1,754.2
1988
1,764.5
501.3
1,132.9
0.613
1,849.8
1989
1,941.3
573.4
1,257.4
0.643
1,956.9
1990
2,146.0
644.2
1,395.1
0.663
2,103.6
1991
2,193.1
677.0
1,435.1
0.697
2,057.6
1992
2,575.9
726.9
1,651.4
0.744
2,221.1
1993
2,835.5
757.2
1,796.4
0.801
2,241.7
1994
3,273.5
783.5
2,028.5
0.827
2,454.4
1995
3,537.1
866.4
2,201.8
0.832
2,645.0
1996
3,966.5
911.3
2,438.9
0.858
2,843.0
1997
4,511.7
939.6
2,725.7
0.889
3,064.9
1998
5,235.3
953.0
3,094.2
0.928
3,333.5
1999
5,910.8
1,044.9
3,477.8
0.962
3,614.8
2000
6,299.3
1,161.1
3,730.2
1.000
3,730.2
2001
6,586.6
1,169.7
3,878.2
1.046
3,707.6
2002
6,768.8
1,311.0
4,039.9
1.082
3,734.9
2003
6,960.4
1,345.3
4,152.9
1.105
3,756.8
2004
7,162.5
1,469.4
4,315.9
1.123
3,842.8
2005
7,527.7
1,503.7
4,515.7
1.142
3,953.6
2006
$7,935.3
$1,568.0
$4,751.6
1.159
$4,098.7
28
H.
Cost of Commuting (Col K)
The cost of commuting has two main components: (a) the opportunity cost in
terms of leisure time; and (b) motor vehicle user costs, such as depreciation, fuel,
gas and oil, interest payments, and so on. Table 7 shows the travel to work
characteristics in 2000.
3
As shown, 70% of total workers who traveled daily
traveled alone, or 892, 122 workers-- Le. 77.6% of the total employment in Puerto
Rico. 4 The average worker traveled time was 29.4 minutes per day, a figure that
not only surpassed the United States average (25.5 minutes), but also the four
regions of the country5.
To compute the opportunity cost of the traveled time per worker in terms of
leisure (Cd, the following equation was used:
CL =
(Average time traveled per day per worker) x (cost per minute in
real wage terms) x (Factor to adjust the worth of leisure time
relative to working hours).
Table 8 shows the cost of commuting using the opportunity cost of leisure
time, which was estimated using a factor of 1.5. This implies a given monetary
cost due to the time devoted to travel, instead of using other alternatives. The
following equation was used:
Cc = CL x Total Commuting Workers X 245 working days per year.
Cost figures were deflated using the implicit price index of transportation, at base
prices in 2000. In 2006, the cost of commuting, at 2000 prices, meant an annual
The information was gathered from the 2000 U.S. Census, Summary File 3 and published
also by the Statistical Abstract of the U.S. 2005.
4 Puerto Rico, Department of Labor and Human Resources. 2000.
5 The figure of average time to work (minutes) was as follow; Northeast, 28.2; Midwest,
23.2; South, 25.6 and West, 25.7. US Census, 2000, Summary File 3. See Table 7. The
cost per minute was calculated using the average real wage rate per hour at 2000 prices.
See Table 2.
3
29
value equal to
S1,507.0 million. This figure should be considered as a decreasing
element in the welfare index of any country.
Table 8
Travel to Work Characteristics for Puerto Rico; 2000
Means of Transportation
Driving alone
Carpooled
Public transportation
Walked
Motorcycle, bike, and other means of
transportation
Worked at home
Number of Workers
Number of workers traveled to work
Total Workers over 16 years old
Percentage of workers traveling to work
Average Travel Time (minutes)
Number of workers
626,578
163,279
48,322
36,834
17,109
15,964
908,386
892,122
1,150,000
77.6%
29.4
Sources: 2000 U.S. Bureau of the Census, Summary File 3. The figure of total workers over 16 years old
are from the Department of Labor and Human Resources.
30
Table 9
Cost of Commuting-Opportunity cost in Leisure Time (Component (a)) 2000 millions
Fiscal Years
Total
Employment
(000)
S
Persons
working over
16 years old
(thousand)
at
Average
Wage Rate
per hour at
2000 prices
Cost per
minute
(2000 prices)
Opportunity cost
in leisure time
per minute bt
Cc =
Opportunity cost
in leisure time
(2000 millions $)
1970
686
532.3
$5.79
$0.0965
$0.1448
$555.2
1971
699
542.4
$6.20
$0.1033
$0.1550
$605.5
1972
738
572.7
$6.29
$0.1048
$0.1572
$648.4
1973
745
578.1
$6.74
$0.1123
$0.1685
$701.5
1974
744
577.4
$6.58
$0.1097
$0.1645
$684.0
1975
699
542.4
$6.70
$0.1117
$0.1676
$654.9
1976
678
526.1
$6.72
$0.1120
$0.1680
$636.8
1977
691
536.2
$6.84
$0.1140
$0.1711
$660.8
1978
722
560.3
$6.79
$0.1132
$0.1698
$685.2
1979
735
570.4
$6.99
$0.1164
$0.1747
$717.6
1980
753
584.3
$6.66
$0.1109
$0.1664
$700.4
1981
759
589.0
$6.50
$0.1084
$0.1626
$689.7
1982
719
558.0
$6.61
$0.1102
$0.1654
$664.6
1983
703
545.5
$6.68
$0.1114
$0.1670
$656.4
$0.1703
$707.4
$732.9
1984
743
576.6
$6.81
$0.1136
1985
758
588.2
$6.92
$0.1153
$0.1730
1986
777
603.0
$7.02
$0.1170
$0.1755
$762.3
1987
834
647.2
$7.01
$0.1168
$0.1752
$816.9
1988
873
677.5
$7.15
$0.1192
$0.1789
$872.8
1989
948
735.7
$6.89
$0.1148
$0.1723
$912.9
1990
963
747.3
$7.02
$0.1170
$0.1755
$944.6
199-~
977
758.2
$6.92
$0.1153
$0.1729
$944.3
1992
977
758.2
$6.91
$0.1151
$0.1727
$943.1
1993
999
775.2
$7.44
$0.1241
$0.1861
$1,039.2
1994
1,011
784.6
$7.57
$0.1262
$0.1893
$1,069.9
1995
1,051
815.6
$7.66
$0.1276
$0.1914
$1,124.7
1996
1,092
847.4
$7.77
$0.1295
$0.1942
$1,185.2
$1,246.1
1997
1,127
874.6
$7.91
$0.1319
$0.1978
1998
1,139
883.9
$8.02
$0.1337
$0.2005
$1,276.4
1999
1,143
887.0
$8.33
$0.1389
$0.2084
$1,331.2
2000
1,150
892.4
$8.57
$0.1428
$0.2141
$1,376.5
2001
1,144
887.8
$8.71
$0.1452
$0.2178
$1,392.9
2002
1,152
894.0
$8.79
$0.1465
$0.2197
$1,414.9
2003
1,188
921.9
$8.69
$0.1449
$0.2173
$1,442.9
2004
1,206
935.9
$8.93
$0.1488
$0.2233
$1,505.1
2005
1,238
960.7
$8.92
$0.1487
$0.2231
$1,543.9
2006
1,253
965.0
$8.67
$0.1445
$0.2168
$1,507.0
Source: 2000 U.S. Bureau of the Census, Summary File 3, and the Department of Labor and Human Resources
bt equal to the cost per
(figures of total employment).
at under the assumption of 77.6% of total workers
minute x 1.5
31
The second component of the cost of commuting is the motor vehicles '-user
costs. According to the American Automobile Association (AAA), in the United
States the average cost of driving a new passenger car in 2004 was 56.2 cents per
mile or $8,431 per year. The three largest components of motor -vehicle costs
were depreciation, full insurance, and fuel. The MA cost per mile between 1994
and 2004 were as follows:
Year
Cost per mile
(cents)
39.4
41.2
42.6
44.8
46.1
47.0
49.1
51.0
50.2
51.7
56.2
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source: American Automobile Association (AAA)
Cost estimation for years 2005 and 2006 was done using the 1970-1993 period
annual rate of growth of 3.6%. Since these figures are for new cars, an adjustment
was performed for the whole stock of motor vehicles used in commuting.
Further adjustments were made in order to estimate the true number of
workers commuting, since not all vehicles were not driven vehicles to work. Table
8 shows the number of workers under the categories of driving alone and
carpooling. Under the assumption that a carpool consists of two persons per car,
the total estimated number of workers is 708,218 or 61.6% of total workers in 2000.
32
Therefore, the rate of 61.6% was used to estimate the number of workers driving
their own cars for the years beyond 2000. 6
Given all these adjustments and parameters, the following equation was used
to determine the user-cost for commuting workers:
Cv =
(AAA cost per miles x 0.75, at 2000 prices 7 ) x (Number of workers
driven cars) x (245 working days/year) x (19.6 miles x trip).
Table 10 shows the cost of commuting by vehicle-users between 1970 and 2006.
The two components of this cost are presented in Table 11. The total cost of
commuting in 2006 was $2,800 million at 2000 prices.
61t was also assumed that the number of miles per trip is fixed at 19.6 miles per year. This
figure came from the following calculation; we know that each worker used 29.4 minutes in
a commuting trip everyday, which means 0.49 hours (29.4 minutes / 60 minutes per hour).
If each worker drives 40 miles per hour, then the number of miles per trip per worker every
day is 19.6 miles (0.49 hour x 40 mph).
This parameter was deflated by the implicit price index of transportation in Puerto Rico at
2000 prices. Data came form the Puerto Rico Planning Board.
7
33
Table 10
Cost of Commuting -User Costs (Component (b)). 2000 millions
S
Number of
workers driven
cars (000)
Cost of Commuting
-Vehicles User (Cv)
(millions $)
1970
Adjusted
AAA average cost
of travel per mile
cents, 2000 prices
$0.4413
422.6
$895.6
1971
$0.4493
430.6
$928.9
1972
$0.4509
454.6
$984.4
1973
$0.4469
458.9
$984.8
1974
$0.4165
458.3
$916.6
1975
$0.3695
430.6
$764.0
Fiscal
Years
1976
$0.3584
417.6
$718.7
1977
$0.3580
425.7
$731.8
1978
$0.3532
444.8
$754.4
1979
$0.3394
452.8
$737.9
1980
$0.2842
463.8
$633.0
1981
$0.2574
467.5
$577.9
1982
$0.2469
442.9
$525.0
1983
$0.2648
433.0
$550.6
1984
$0.2823
457.7
$620.5
1985
$0.2954
466.9
$662.3
1986
$0.3051
478.6
$701.2
1987
$0.3114
513.7
$768.2
1988
$0.3054
537.8
$788.7
1989
$0.3057
584.0
$857.1
1990
$0.3176
593.2
$904.8
1991
$0.3108
601.8
$898.2
1992
$0.3198
601.8
$924.1
1993
$0.3437
615.4
$1,015.6
1994
$0.3618
622.8
$1,082.0
1995
$0.3658
647.4
$1,137.2
1996
$0.3717
672.7
$1,200.5
1997
$0.3829
694.2
$1,276.5
1998
$0.3900
701.6
$1,313.8
1999
$0.3910
704.1
$1,322.1
2000
$0.3683
708.4
$1,252.7
2001
$0.3650
704.7
$1,235.3
2002
$0.3655
709.6
$1,245.6
2003
$0.3635
731.8
$1,277.5
2004
$0.3801
742.9
$1,356.1
2005
$0.3680
762.6
$1,347.8
2006
$0.3488
771.8
$1,292.8
Source: American Automobile Association (AAA), and calculations by authors.
34
Table 11
Total Cost of Commuting (Col. K) 2000 millions
S
Col. K
Fiscal Years
Cost of
Commuting (Cv)
(millions $)
2000 prices
1970
Cost of
Commuting
(Cc)
(millions $)
2000 prices
$555.2
$895.6
Total Costs of
Commuting (Cc +Cv)
(millions $, at 2000
prices)
$1,450.8
1971
$605.5
$928.9
$1,534.4
1972
$648.4
$984.4
$1,632.8
1973
$701.5
$984.8
$1,686.3
1974
$684.0
$916.6
$1,600.6
1975
$654.9
$764.0
$1,418.9
1976
$636.8
$718.7
$1,355.5
1977
$660.8
$731.8
$1,392.6
1978
$685.2
$754.4
$1,439.6
1979
$717.6
$737.9
$1,455.5
1980
$700.4
$633.0
$1,333.4
1981
$689.7
$577.9
$1,267.6
1982
$664.6
$525.0
$1,189.6
1983
$656.4
$550.6
$1,207.0
1984
$707.4
$620.5
$1,327.9
1985
$732.9
$662.3
$1,395.2
1986
$762.3
$701.2
$1,463.5
1987
$816.9
$768.2
$1,585.1
1988
$872.8
$788.7
$1,661.5
1989
$912.9
$857.1
$1,770.0
1990
$944.6
$904.8
$1,849.4
1991
$944.3
$898.2
$1,842.5
1992
$943.1
$924.1
$1,867.2
1993
$1,039.2
$1,015.6
$2,054.8
1994
$1,069.9
$1,082.0
$2,151.9
1995
$1,124.7
$1,137.2
$2,261.9
1996
$1,185.2
$1,200.5
$2,385.7
1997
$1,246.1
$1,276.5
$2,522.6
1998
$1,276.4
$1,313.8
$2,590.2
1999
$1,331.2
$1,322.1
$2,653.3
2000
$1,376.5
$1,252.7
$2,629.2
2001
$1,392.9
$1,235.3
$2,628.2
2002
$1,414.9
$1,245.6
$2,660.5
2003
$1,442.9
$1,277.5
$2,720.4
2004
$1,505.1
$1,356.1
$2,861.2
2005
$1,543.9
$1,347.8
$2,891.7
2006
$1,507.0
$1,292.8
$2,799.8
Source: American Automobile Association (AAA), and calculations from authors.
35
I.
Costs of Pollution Control (Col. L)
Daly and Cobb (1989) argued to take into account the personal expenditures on
pollution abatement and control for the ISEW Accounts. The main argument is that
these costs should be subtracted from personal consumption on the basis that they
are defensive.
In Puerto Rico, unfortunately there is no information, so far, on this type of
expenditure.
To compensate for this deficiency, an extrapolation was done by
using the United States ratio between the costs of household pollution control to
the personal consumption expenditures as shown in the 2006 Genuine Progress
Indicator (Talberth et al. 2007). An estimate of the "monetary value for both
variables was made for years 2005 and 2006, using their average annual rate of
growth. Estimates are shown in Table 12.
J. Cost of Automobile Accidents (Col. M)
Column M is devoted to the estimation of the non-injury costs of automobile
accidents. According to the mainframe of ISEW, this estimation should be
subtracted from personal consumption on the basis that they are defensive
expenditures, and, consequently, should not be considered as a contributor to
welfare. Defensive hospital and medical costs are assumed to be considered in
columns Hand J.
In Puerto Rico, the Office of Commissioner of Insurance publishes data
information of premiums and losses paid by local insurance companies. Table 13
shows the losses paid for automobile accident liabilities and damages between
1997 and 2005. For instance, the sub-total amounted to $395 million in 1997 to
$540 million in 2005, both at current prices.
36
Table 12
Total Cost of Pollution Abatement in Puerto Rico: Fiscal Year 1970 to 2006. 2000 millions $
Fiscal
Year
Col (1)
United States
Real Personal
Consumption
2000 prices
billions $
Col (2)
Col (3)
Ratio =
Cost of
pollution
abatement,
billions $
Col (2)
Col (1)
Col (4)
Real Personal
Consumption
Puerto Rico
2000 price
Millions $
Col L.
=Col (3) x Col (4)
Cost of pollution
abatement,
Puerto Rico
millions $
1970
$2,451.9
$4.0
0.165%
$12,120.5
$20.0
1971
1,545.5
$4.5
0.177%
$13,288.1
$23.5
$25.0
1972
1,701.3
$4.7
0.175%
$14,274.3
1973
2,833.8
$6.2
0.119%
$15,064.1
$33.0
1974
1,811.3
$7.0
0.150%
$14,948.8
$37.3
$45.8
1975
1,876.9
$9.0
0.314%
$14,601.9
1976
3,035.5
$10.0
0.330%
$15,891.3
$51.5
1977
3,164.1
$10.7
0.340%
$16,888.0
$57.4
1978
3,303.1
$11.1
0.339%
$17,472.3
$59.3
1979
3,383.4
$11.7
0.347%
$18,007.3
$62.4
1980
3,374.1
$11.8
0.379%
$17,825.6
$67.5
1981
3,411.1
$14.4
0.411%
$17,965.2
$75.8
1982
3,470.3
$14.0
0.401%
$17,933.1
$72.1
1983
3,668.6
$15.6
0.426%
$18,454.8
$78.7
1984
3,863.3
$17.0
0.441%
$19,317.3
$85.2
1985
4,064.0
$18.2
0.447%
$20,187.6
$90.1
1986
4,228.9
$18.5
0.437%
$11,031.4
$92.0
1987
4,369.8
$16.0
0.366%
$21,140.8
$81.3
1988
4,546.9
$16.9
0.372%
$23,117.6
$86.1
1989
4,675.0
$14.4
0.308%
$23,388.1
$72.1
1990
4,770.3
$11.6
0.143%
$23,865.6
$58.0
1991
4,778.4
$8.9
0.186%
$23,587.5
$43.9
1992
4,934.8
$9.1
0.186%
$24,469.5
$45.6
1993
5,099.8
$9.5
0.186%
$15,692.2
$47.9
1994
5,290.7
$10.9
0.106%
$26,979.4
$55.5
1995
5,433.5
$11.6
0.114%
$18,364.2
$60.7
1996
5,619.4
$12.4
0.211%
$30,116.3
$66.7
1997
5,831.8
$13.3
0.118%
$31,859.0
$72.7
1998
6,125.8
$14.2
0.231%
$33,167.2
$77.3
1999
6,438.6
$15.1
0.236%
$35,063.9
$81.8
1000
6,739.4
$16.3
0.241%
$36,132.6
$87.2
$36,491.4
$91.8
2001
6,910.4
$17.4
0.152%
1002
7,099.3
$18.6
0.162%
2003
7,306.6
$19.9
2004
7,588.6
2005
7,867.3
2006
$8,156.3
$37,425.9
$98.0
0.172%
$38,818.1
$105.6
$21.3
0.180%
$40,480.9
$113.4
$22.7
0.289%
$41,855.0
$121.0
$24.3
0.298%
$42,788.8
$127.5
Sources: See Talberth, J; C. Cobb and N. Slattery, The Genuine Progress Indicator, 2006:
A Tool for Sustainable Development, Redefining Progress, Oakland, CA ,(www.rprogress.org).
37
The compound annual rate of growth is 4%. Monetary values of years beyond 1990
to 2005 are estimated by this annual rate of growth. The figures are deflated by
the implicit price index of personal consumption expenditures of transportation.
Table 14 presents the calculation of the cost of automobile accidents in Puerto
Rico at year 2000 prices. These figures are adjusted by the Implicit Price of
Personal Durable Consumption Goods Expenditures year base 2000. The monetary
value for year 2006 is $553.1 million at 2000 prices.
Table 13
Losses Paid by Local Insurers in Auto Liabilities and Damages
Fiscal Years 1997-2005. Millions $
Fiscal
Years
1997
1998
1999
2000
2001
2002
2003
2004
2005
Sources:
Private
Auto
Liability
$49.6
$106.7
$136.9
$149.2
$157.0
$154.0
$151.5
$160.5
$181.5
Commercial
Auto Liability
$69.3
$63.9
$77.7
$87.1
$87.1
$83.9
$97.2
$89.9
$97.1
..
OffIce of CommIssIoner of Insurance,
Private Auto
Physical
Damage
$187.9
$178.9
$197.6
$181.8
$203.4
$197.0
$182.4
$187.0
$197.2
Commercial
Auto
Physical
Damage
$87.7
$92.8
$92.7
$82.3
$59.6
$65.9
$60.7
$60.0
$64.6
Commonwealth of Puerto RIco
38
Sub-total
$394.5
$442.3
$504.9
$500.4
$507.1
$500.8
$491.8
$497.4
$540.4
Table 14
Cost of Automobile Accidents: Fiscal Year 1970 to 2006
2000 millions S
Implicit Price PCE
Durable Consumer
Goods
deflator 2000=1.00
Col. M
Real Auto Physical
Damages and Liabilities
(2000 prices
millions $)
Fiscal
Year
Auto Physical
Damages and
Liabilities
(millions $)
1970
$130.6
0.40305
$324.0
1971
$136.0
0.41374
$328.8
1972
$141.7
0.42321
$334.9
1973
$147.7
0.43542
$339.1
1974
$153.8
0.45435
$338.6
1975
$160.3
0.50565
$316.9
1976
$167.0
0.54198
$308.0
1977
$173.9
0.56611
$307.2
1978
$181.2
0.59786
$303.1
1979
$188.8
0.65130
$289.8
1980
$196.7
0.71817
$273.8
1981
$204.9
0.78168
$262.1
1982
$213.5
0.79084
$269.9
1983
$222.4
0.82351
$270.0
1984
$231.7
0.85740
$270.2
1985
$241.4
0.87939
$274.5
1986
$251.4
0.89282
$281.6
1987
$261.9
0.90076
$290.8
1988
$272.9
0.92458
$295.2
1989
$284.3
0.94382
$301.2
1990
$296.2
0.90992
$325.5
1991
$308.6
0.93466
$330.1
1992
$321.5
0.92092
$349.1
1993
$334.9
0.93563
$357.9
1994
$348.9
0.95237
$366.3
1995
$363.5
0.95115
$382.2
1996
$378.7
0.95969
$394.6
1997
$394.5
0.97405
$405.0
1998
$442.3
1.00275
$441.1
1999
$504.9
0.98321
$513.5
2000
$500.4
1.00000
$500.4
2001
$507.1
0.95328
$532.0
2002
$500.8
0.97954
$511.3
2003
$491.8
0.99511
$494.2
2004
$497.4
1.01282
$491.1
2005
$540.4
1.01466
$532.6
2006
1.01618
$553.1
$562.1
Sources: Puerto RIco Planmng Board (CPB) and OffIce of CommIssIoner of
Insurance, Puerto Rico and author calculations.
39
K.
Cost of Water Pollution (Col. N)
There is no data information about the costs of water pollution available for
Puerto Rico; therefore, an estimate was done by extrapolating the United States
water pollution cost shown in the 2006 GPI. The ratio between water pollution
costs per year relative to the United States PCE was computed and then applied to
Puerto Rico. Puerto Rico has various environmental pollution issues such as water
supplies and soil contamination. Solid waste disposal is one of the main reasons for
this type of contamination, and it is actually causing sizable pollution costs in
Puerto Rico. Several agency studies have revealed that 8,100 tons of solid waste
were being produced daily on the island (1994 figure), and it is growing at an
annual rate of 1%. The cost of water pollution is outlined in Table 15.
L.
Cost of Air Pollution (Col. 0)
No historical estimate of air pollution was found for Puerto Rico.
Using the
same ratio of U.S. Cost of Air Pollution to U.S. PCE estimates, we did a homologous
one for Puerto Rico. (See Table 15).
M.
Cost of Noise Pollution (Col. P)
Given the fact that any estimates for noise pollution appears to exist in Puerto
Rico, we extrapolated the ratio between the U.S. Cost of Noise Pollution to U.S.
PCE to Puerto Rico. Estimates can be found in Table 15.
40
Table 15
Costs of Water, Air, and Noise Pollution to Puerto Rico 2000 prices)
Fiscal Years 1970 to 2006
Column N·
Column O·
Column p.
Fiscal Year
Cost of water
pollution
(millions $)
Cost of air
pollution
(millions $)
Cost of noise
pollution
(millions $)
1970
$307.1
$491.1
$61.6
1971
329.3
503.0
67.1
1972
340.1
493.9
70.0
1973
348.0
482.0
71.1
1974
352.0
467.5
71.8
1975
338.1
407.6
69.3
1976
358.5
431.8
72.2
1977
373.4
421.4
74.3
1978
378.8
407.1
74.4
1979
390.1
370.5
75.6
1980
391.8
362.7
75.8
1981
395.1
337.3
76.0
1982
397.8
299.5
75.6
1983
397.1
288.2
74.3
1984
403.1
296.1
74.6
1985
407.0
279.6
74.9
1986
418.0
277.9
75.7
1987
435.6
284.8
78.3
1988
442.8
288.0
79.0
1989
442.2
279.8
78.5
1990
448.8
261.6
79.3
1991
450.3
257.4
79.0
1992
458.2
242.4
80.1
1993
472.8
241.8
82.2
1994
488.6
247.6
84.1
1995
511.2
231.6
86.9
1996
534.8
234.5
90.1
1997
556.5
232.7
92.8
1998
565.8
229.3
93.2
1999
580.5
229.1
94.4
2000
584.9
217.6
93.8
2001
587.3
213.4
93.3
2002
600.1
212.1
94.1
2003
619.3
212.8
95.8
2004
638.6
213.6
97.1
2005
660.3
220.9
100.4
2006
$675.0
$225.8
$102.7
Sources: See Talberth, J; C. Cobb and N. Slattery, The Genuine Progress Indicator, 2006:
ATool for Sustainable Development, Redefining Progress, Oakland, CA (www.rprogress.org),
and authors' calculations.
41
N.
Cost of Wetland Losses (Col. Q)
Wetlands contain some of the most productive natural habitats in the world,
but their benefits are not always considered in traditional economic accounts.
Wetlands are a valuable resource that naturally filter chemical contaminants from
our water and land and help control floods. They also nurture and sustain a vast
array of bird, plant, aquatic and animal life, and because of this, damaging or
eliminating them, would be devastating to the coastal ecosystem. Wetlands also
provide recreational opportunities, aesthetic benefits, and sites for research and
education, and support fisheries. Benefits derived from wetlands are indeed
"public goods," for which there is no price valuation.
As Talberth, Cobb, and
Slattery (2006) have stated..., "when a farmer drains and fills a marsh, the GDP
rises by the increased output of the farm. However, the loss of services from the
wetland goes uncounted". The ISEW and GPI Accounts have attempted to rectify
such an approach and/or estimation, by valuing their services, especially when
wetland acreage is used for other purposes.
Wetlands in Puerto Rico are diverse, ranging from interior mountainous
wetlands of the rain forest to intertidal mangrove swamps along the coast. Puerto
Rico's wetlands are valuable natural resources that provide habitat for wildlife and
supply water for several large cities. Practically all of Puerto Rico's wetlands have
been modified by human's activities. Wetland restoration efforts by local and
federal agencies are underway at several locations throughout the Island.
According to a Federal Agency study8, in 1974 Puerto Rico had 16,029 acres of
wetland but this figure was 53% of their original acreage since the 20 th Century. By
1959, mangroves were restored to 18,000 acres at a rate of 108.5 acres per year,
but between 1975 and 1987 the rate slowed to about 100 acres per year. However,
x The Impact ofFederal Programs on Wetlands
(hnp://www.dflLglJv/lJepdwellands2/v2ch 10. hlml).
- Vol. II Puerto Rican Coast
42
given the conservation efforts, this rate was further reduced by 50 percent since
year 2000.
Following the estimating procedures perfomed by Talberth, Cobb, and Slattery
(2006) and multiplying each acre of wetland loss by the price of $914 per acre
(Woodward and Wui, 2000), the total loss per year, between 1970 and 2006, was
estimated. These estimates were deflated using the implicit price index of PEC at
year 2000 dollar value. Table 16 shows the cost of Wetland losses.
The U.S. Censuses of Agriculture in Puerto Rico have shown that farmland has
been decreasing rapidly since 1950 due to the urbanization and the process of
industrial development. In 1950 farmland accounted for 1,844,886 cuerdas. 9 ,
whereas by 2002, it was drastically reduced to 609,687 cuerdas. This implies an
annual rate of reduction of 22,200 acres per year. Table 17 shows the changes in
farmland between 1969 and 2006 as well as the monetary value of the cost of
farmland losses.
9
One cuerda equals 0.971212 acres.
43
Table 16
The Cost of Wetland Losses in Puerto Rico: Fiscal year 1970 to 2006.
Fiscal Year
Wetland Acres Losses
Cumulated since 1959 up to
2006, by year
ColQ.
Wetland Losses
(millions $;
2000 prices)
1970
3,255
$9.63
1971
3,364
$9.56
1972
3,472
$9.56
1973
3,581
$9.42
1974
3,689
$8.73
$7.83
1975
3,798
1976
3,906
$7.58
1977
4,015
$7.52
1978
4,123
$7.41
1979
4,232
$7.20
1980
4,340
$6.57
1981
4,449
$6.14
1982
4,557
$5.96
1983
4,666
$5.92
1984
4,774
$5.99
1985
4,883
$5.98
1986
4,991
$6.09
1987
5,100
$6.17
1988
5,200
$6.10
5,300
$6.00
1989
1990
5,400
$5.94
1991
5,500
$5.80
1992
5,600
$5.82
1993
5,700
$5.87
1994
5,800
$5.85
1995
5,900
$5.90
1996
6,000
$5.93
1997
6,100
$5.92
1998
6,200
$5.89
1999
6,300
$5.94
2000
6,400
$5.85
2001
6,450
$5.72
2002
6,550
$5.77
2003
6,650
$5.76
2004
6,750
$5.76
6,850
$5.66
6,950
$5.48
2005
2006
Sources: The Impact of Federal Programs on Wetlands' Vol. II Puerto Rican Coast
(http://www.doi.gov/oepc/wetlands2lv2ch10.html). and Talberth, Cobb and Slattery
(2006).
44
Table 17
Cost of Farmland Losses: 1969 to 2006. 2000 prices
Fiscal Years
Farmland in
Puerto Rico
(cuerdas)
Changes in Farmland
since 1950 (acres)
Cumulated
1969
1,334,800
-494,783
$1,121.6
Col. R
Cost of Farmland
Losses
(millions $)
$554.9
1970
1,307,953
-520,825
$1,180.6
$614.9
1971
1,268,487
-559,107
$1,242.7
$694.8
1972
1,229,021
-597,389
$1,308.1
$781.5
$875.3
Price of Ecosystem
Services
(2000 prices)
1973
1,189,554
-635,672
$1,377.0
1974
1,150,088
-673,954
$1,449.5
$976.9
1975
1,110,622
-712,236
$1,525.7
$1,086.7
1976
1,071,155
-750,519
$1,606.0
$1,205.4
1977
1,031,689
-788,801
$1,690.6
$1,333.5
$1,493.6
1978
979,603
-839,325
$1,779.5
1979
980,317
-838,632
$1,873.2
$1,570.9
1980
981,030
-837,940
$1,971.8
$1,652.2
1981
981,744
-837,248
$2,075.6
$1,737.8
1982
982,457
-836,556
$2,184.8
$1,827.7
1983
963,335
-855,105
$2,299.8
$1,966.6
1984
944,213
-873,653
$2,420.8
$2,115.0
$2,273.6
1985
925,090
-892,202
$2,548.3
1986
905,968
-910,750
$2,682.4
$2,443.0
1987
886,846
-929,299
$2,823.6
$2,623.9
1988
874,855
-940,930
$2,972.2
$2,796.6
1989
862,865
-952,561
$3,128.6
$2,980.2
1990
850,874
-964,191
$3,293.3
$3,175.3
1991
838,884
-975,822
$3,466.6
$3,382.8
1992
826,893
-987,453
$3,649.0
$3,603.3
1993
833,324
-981,215
$3,841.1
$3,768.9
1994
839,755
-974,977
$4,043.3
$3,942.1
1995
846,186
-968,739
$4,256.1
$4,123.0
1996
852,616
-962,502
$4,480.1
$4,312.1
1997
859,047
-956,264
$4,715.9
$4,509.6
1998
865,478
-950,026
$4,964.1
$4,716.0
1999
821,780
-992,413
$5,225.3
$5,185.7
2000
778,083
-1,034,799
$5,500.3
$5,691.7
2001
734,385
-1,077,186
$5,775.4
$6,221.1
2002
690,687
-1,119,573
$6,064.1
$6,789.2
2003
646,989
-1,161,960
$6,367.3
$7,398.6
2004
603,292
-1,204,347
$6,685.7
$8,051.9
2005
559,594
-1,246,733
$7,020.0
$8,752.0
2006
515,896
-1,289,120
$7,371.0
$9,502.1
Sources: See Talberth, J; c. Cobb and N. Slattery (2006),
Department
of Agriculture, various years.
45
~and
u.S. Census of Agnculture, US
O.
Depletion of Non- Renewable Resources (Col. S)
The depletion of non-renewable resources can be understood as an opportunity
cost shifting from present to future generations. In the case of non-renewable
natural capital, one has to note that it cannot be increased, but can only be
diminished throughout time. Talberth, Cobb and Slattery (2006), have stated citing
Herman Daly that
rr•••
our current accounting system counts this liquidation of
natural capital wealth as income which is clearly wrong, because it is not a
permanent or sustainable source of consumption" (Daly, 1996).
Given the fact that Puerto Rico has never had oil, gas and coal extracting
industries, the depletion of these non-renewable resources should not be taken
into consideration for ISEW accounts. Notwithstanding, external costs generated by
using petroleum, gas and coal, instead of other available renewable energy
technologies, should be accounted.
External costs are defined as those currently incurred in relation to health care
and environment and due to electricity power plants. These costs are not included
in the price of the energy produced; they are borne by groups of persons or by a
society at large, generally without consent or due compensation.
External costs should be an essential element in energy policy because, without
them, the resulting mix of energy sources is unlikely to minimize the cost to
society, nor is the distribution of costs and benefits. For the European Union (EU),
the cost of electricity generation, without these external costs, averages about 4
cents/kWh, but when included, the price of electricity from coal doubles that of
gas and increases to around 30%10.
In order to calculate the external costs of using non- renewable energy sources
as petroleum, gas and carbon instead of renewable energy source technologies, it
10 Bickel P.
and Friedrich, R. (editors) 2005. Sustainable Energy Systems: ExternE:
Externalitites of Energy, Methodology Update. University of Stuttgard, Germany
(http://www.externe.infol)
46
is assumed that the percentage of non-renewable energy sources used· in the
United States from 1980 to 2006, would be the opportunity cost for Puerto Rico, or
the same as, the cost of unused renewable energy sources available in Puerto Rico.
In addition, it is assumed that the external cost of this non-renewable source is 30%
of the oil price (Texas Intermediated Price). On the basis of these assumptions and
using the information given by the Energy Information Administration on the Total
Primary Energy in BTUs in Puerto Rico, the equivalent consumption of oil in
petroleum barrels (5.8 millions of BTUs
= 1 barrel of oil) was calculated and then
multiplied by 30% of the Texas Intermediated Price.
Finally, the calculation
estimates were deflated using the implicit price index of peE at year 2000 prices
(Table 18).
47
Table 18
Cost of Using Non-Renewable Energy Sources. Millions
2000 prices.
Fiscal
Years
Primary Energy
Consumed
Per capita
(Million BTU)
Petroleum Oil
Barrel Equivalent
1970
111.8
52,257,397
0.0%
1971
113.9
54,143,834
0.0%
1972
116.1
56,078,443
0.0%
1973
118.2
58,062,304
0.0%
1974
120.3
60,096,518
0.0%
1975
122.5
62,182,209
0.0%
1976
124.6
64,320,523
0.0%
1977
126.8
66,512,634
0.0%
0.0%
S
Percentage of U.S.
Renewable Sources
from Total Energy
Used
External Cost =
30% x Texas
Intermediated
Price
Total Cost of
Using NonRenewable
Energy
Sources;
2000 prices
1978
128.9
68,759,736
1979
131.1
71,063,050
0.0%
1980
133.2
73,423,822
0.0%
$12.46
$0.0
1981
139.0
77,411,293
0.0%
$12.22
$0.0
1982
101.0
56,840,436
0.0%
$11.21
$0.0
1983
96.7
55,028,206
0.0%
$10.13
$0.0
1984
107.3
61,683,754
0.0%
$9.76
$0.0
1985
91.9
53,420,347
0.0%
$9.32
$0.0
1986
98.5
57,883,985
0.0%
$5.01
$0.0
1987
101.5
60,288,834
7.4%
$6.39
$37.8
1988
91.9
55,144,578
7.2%
$5.33
$27.4
1989
88.8
53,883,467
7.4%
$6.53
$32.3
1990
84.6
51,874,167
7.2%
$8.17
$36.9
1991
104.4
64,457,513
7.3%
$8.16
$44.1
1992
92.5
57,494,592
6.9%
$6.85
$30.8
1993
96.1
60,115,136
7.0%
$6.15
$29.3
1994
97.3
61,289,000
6.8%
$5.73
$26.3
1995
99.0
62,827,333
7.3%
$6.14
$30.9
1996
100.1
63,964,244
7.6%
$7.38
$38.7
1997
102.5
65,903,865
7.5%
$6.87
$35.9
1998
104.6
67,725,006
6.9%
$4.80
$23.3
1999
107.4
70,018,481
6.8%
$6.42
$31.6
$47.6
2000
115.4
75,756,196
6.2%
$10.10
2001
124.6
82,472,433
5.5%
$8.64
$38.2
2002
123.6
82,225,502
6.0%
$8.70
$41.1
2003
133.4
89,213,430
6.2%
$10.38
$54.3
2004
141.2
94,798,363
6.1%
$13.81
$74.4
2005
2006
147.6
154.1
99,548,820
104,356,945
6.1%
6.1%
$18.82
$22.03
$103.2
$120.9
Sources: Energy Information Administration, International Energy Annual 2004.
(http://www .eia.doe.govIpub/international/iealfItableel c.xls)
48
P.
Carbon Dioxide Emissions Damage (Col. T)
Global Warming has created a strong link between Emissions of Carbon Dioxide
(C0
2
)
and threats to the economic welfare such as property and lifestyle damages
due to storms, floods, and droughts. These incidences have escalated the costs in
the insurance due to payouts and the replacement losses on physical properties-buildings, livestock, and other household resources. The impact may ironically
increase, at a given period of time, the value of the output and income, which
would not necessarily lead to improvements on welfare.
The cost for Puerto Rico was estimated by computing the ratio of U.S. cost due
to carbon dioxide emissions damage to U.S. consumption (Talberth, Cobb, and
Slattery, 2006). This ratio values for each year were applied to Puerto Rico PCE at
2000 prices. Since values for U.S. are already deflated to 2000 prices, we took the
estimated values with no further price adjustments.
Q.
Cost of Ozone Depletion
The cost of ozone depletion for Puerto Rico was estimated by applying the ratio
of U.S. cost of ozone to U.S. consumption (Talberth, Cobb, and Slattery, 2006).
The values of this ratio for each year were applied to Puerto Rico PCE at 2000
prices and did not required further price adjustments, since those values were
computed by Talberth, Cobb, and Slaterry (2006) for year 2000 prices. Table 19
shows the figure cost values for carbon damages and ozone depletion.
49
Table 19
Cost of Carbon Dioxide Emissions and Ozone Depletion for Puerto Rico. Millions $
Fiscal Year 1970 to 2006
Fiscal Years
Carbon dioxide
Emissions
(2000 prices)
Ozone Depletion
(2000 prices)
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
$47.7
$78.1
$115.6
$164.0
$215.2
$256.6
$331.9
$417.1
$502.0
$609.2
$709.1
$806.2
$893.0
$971.6
$1,081.8
$1,201.1
$1,340.0
$1,527.8
$1,706.0
$1,867.1
$2,062.9
$2,239.4
$2,458.1
$2,728.1
$3,012.4
$3,357.8
$3,748.0
$4,157.8
$4,477.4
$4,844.2
$5,147.3
$5,457.7
$5,855.7
$6,092.6
$6,309.7
$6,523.8
$6,669.4
$756.7
$884.4
$992.5
$1,106.2
$1,214.3
$1,243.2
$1,366.4
$1,468.6
$1,524.2
$1,595.1
$1,646.0
$1,703.0
$1,731.3
$1,747.4
$1,809.1
$1,863.8
$1,942.9
$2,065.0
$2,160.8
$2,204.9
$2,254.6
$2,266.7
$2,314.6
$2,383.6
$2,432.5
$2,499.1
$2,565.9
$2,615.7
$2,600.3
$2,607.7
$2,567.4
$2,528.8
$2,524.7
$2,544.4
$2,554.8
$2,641.5
$2,700.4
Sources: See Talberth, J; C. Cobb and N. Slattery (2006), 00 CIt..
50
R.
The Cost of Crime
Crime is, so far, one of the main social problems currently facing the actual
Puerto Rican society. In spite of ISEW accounts do not consider crime among their
items, the GPI approach does. GPI includes the cost of crime. The conventional
product and income figures considered crime cost as a contributor to economic
growth and, in the absence of a clear-cut definition of welfare, anti-crime
expenditures could be, indeed, interpreted as part of its well-being. Conversely,
under the approaches of ISEW and GPI accounts, crime expenditures or income
directly or indirectly derived from such activities are regarded as a liability rather
than an asset. A lower level of crime might decrease the income level, but might
increase the welfare of the society.
Gross Product and Income Accounts were never designed to take into account
the differences of those expenditures that contribute to societal well-being from
those that detracts from societal well-being or "regrettable expenditures". It does
not recognize the cost to society imposed by some sectors of the economy. On the
other hand, GPI and ISEW approaches distinguish those "regrettable expenditures"
from other types of expenditures and that those external costs impose a burden on
the whole society.
In order to measure the costs of crime, categories such as medical expenses,
loss of productivity, and loss of property must be considered, which are relatively
easy to estimate. Other psychological characteristics such as the trauma of being
raped are more elusive to quantify and might implicitly appear in the form of lost
opportunities or forgone activities.
A full disclosure of the costs of crime is shown in Box 2. Four cost categories
are considered: victim losses, public justice costs, private defensive expenditures
of crime prevention/detection, and offenses to society. The crime index in Puerto
Rico (Delitos Tipo 1-- divided by population level) is composed of the reported
violent crime and property crime; then, the reported crime episodes are divided by
51
the population and finally multiplied by 10,000. Table 20 and Graph 2 presented
the long run behavior of the crime index. This index accounts only for a number of
reported episodes but excludes any monetary costs or values of stolen assets,
productivity losses or spillovers.
Box 2
Cost of Crime by Categories
Victim Losses
Direct losses due to Property
Lost Production due to Absenteeism (omitted)
Lost Income or productivity due to homicides (lucrus cesants)
Lost Income due to death by blood alcohol content (BAC) 0.08% or over
Domestic Disputes or Violence
Public and Private Costs
Police Expenditures
Court and Legal Aids
Corrections: provincial no federal
Business Losses fraud, thefts and shoplifting
Retail Business Defensive Costs (store surveillance, alarms, etc.)
Home Security Systems
Theft Insurances (premiums and claims)
Offense to Society
Drug trade and trafficking
Money laundering (omitted)
Illegal Gaming
Illegal Selling of New Technological Products r'Piracy")
52
Table 20
Reported Crimes in Puerto Rico: Violent and Property: Per 10,000 inhabitants
1970 to 2006
YEAR
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
VIOLENT
CRIME
14,327
15,749
15,355
15,640
15,429
16,606
16,597
16,835
15,150
15,355
16,853
16,321
15,167
15,559
17,410
22,492
26,097
23,616
22,526
21,853
29,912
28,145
32,286
26,342
25,400
22,450
20,147
19,595
16,439
14,206
12,406
11,403
13,471
11,885
10,062
9,579
8,929
PROPERTY
CRIME
52,143
54,689
55,068
56,723
66,864
71,489
69,482
64,709
64,193
64,826
75,327
80,319
81,571
76,693
85,115
93,980
93,425
86,402
89,421
88,174
94,459
91,586
96,588
94,693
90,863
83,638
79,641
75,280
70,581
67,674
62,973
58,714
77,312
69,895
60,356
55,466
53,197
TOTAL
CRIME
66,470
70,438
70,423
72,363
82,293
88,095
86,079
81,544
79,343
80,181
92,180
96,640
96,738
92,252
102,525
116,472
119,522
110,018
111,947
110,027
124,371
119,731
128,874
121,035
116,263
106,088
99,788
94,875
87,020
81,880
75,379
70,117
90,783
81,780
70,418
65,045
62,126
POPULATION
2,712,033
2,756,977
2,802,667
2,849,113
2,896,329
2,944,328
2,993,122
3,042,725
3,093,150
3,144,410
3,196,520
3,230,681
3,265,207
3,300,103
3,335,371
3,371,016
3,407,042
3,443,453
3,480,253
3,517,446
3,555,037
3,579,615
3,604,364
3,629,283
3,654,375
3,679,640
3,705,080
3,730,695
3,756,488
3,782,459
3,808,610
3,839,190
3,859,606
3,877,881
3,895,101
3,911,810
3,927,776
Source: Puerto Rico Police Department, and Commonwealth Planning Board
53
CRIME
INDEX
245.1
255.5
251.3
254.0
284.1
299.2
287.6
268.0
256.5
255.0
288.4
299.1
296.3
279.5
307.4
345.5
350.8
319.5
321.7
312.8
349.8
334.5
357.5
333.5
318.1
288.3
269.3
254.3
231.7
216.5
197.9
182.6
235.2
210.9
180.8
166.3
158.2
Graph 2
Total Crime Index in Puerto Rico
Year 1970 to 2006
400.0.-------------------------------------,
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0 +-.,--,.....-,--r-..,........,..--.,...-..-...,-...,.-...--...--,.....-,r--r-..,........,..--.,...--r-...,-...,.-...--.,--,.....-,...--,.-..,........,..--.,...-..-...,--r--r-.....-,...-r-!
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Source: Puerto Rico Police Department, and Commonwealth Planning Board
54
R.1
Victim Losses
There are six main sub-categories in victim losses, ranging from property
damages or losses to permanent income and/or productivity foregone by the
individual and society. Direct losses due to property are valued using a study
conducted by Brand and Price (2000).
According to the authors, the average
cost of crime per incident is a composed index which includes among others, the
emotional and physical damage, insurance, loss of output, and health services
(Table 21).
"Average costs of crime vary widely between offence
categories. The most costly property crimes are theft of
vehicles, costing around 4,700 per incident. Burglaries cost an
average of £2,300, and criminal damage around £500. Personal
crimes are far more costly on average than property crimes.
Homicides have been estimated to cost at least £1 million, with
other violence against the person costing on average £19,000
per incident".
"Robberies incur costs of almost £5,000 on average. Common
assault is the least costly personal crime, with an average cost
of around £500 per offence." (Brand and Price, 2000)
Table 21
Parameters used to estimate the cost of crime
Brand 8: Price
Category
Sexual Offenses
Robbery (Theft)
Aggravated assault
Larceny-Burglary
(in pound U.K.) a/
13,220
2,906
246
1,384
Adjusted cost this study
in US dollars and adjusted to
PR per capita income
relative to U.K. b/
$5,155
1,133
100
540
a/ included only cost in the category of "As a consequence of crime" , but excluding "loss of
output". See Table 2 from Brand and Price (2000).
b/1 U.K. pound = $1.56 (at 2000)
Using the 2000 price costs of this study, but converting them to U.S. dollar
value and adjusting the ratio of per capita income between U.K. and Puerto Rico 11,
the economic cost of property and individual damages was estimated. These figures
11 The exchange rate in 2000 was 1 pound equaled $1.52 US dollar. Meanwhile, the per
capita income of Puerto Rico was 60.8% of that of U.K. by 2006.
55
excluded murders and vehicles theft.
For vehicle theft, the value of the -stolen
vehicles and the foregone services derived from the vehicle were included. The
average price of U.S. motor vehicles from 1999 to 2003 (Corrado, Dunn, and Oto,
2006) and an extrapolation using the annual average growth rate of 1.6% were used
to value the stock of cars. A depreciation rate of 10% for one year and a flow of
services of 20% per year were assumed. This rate seems to be high in comparison to
other standards, since no mass transportation system is available in Puerto Rico. In
turn, many workers have to drive their own cars in order to commute. Lastly, the
estimated figures were deflated by the implicit price of consumer durable goods
published by the PRPB.
Finally, the value of productivity losses for murders as well as that for a
person's death, caused by driving cars with blood alcohol content (BAC) of 0.08% or
more was estimated. The average age of a murdered or drunk- driving victim is
assumed at 39 years for all years. Thereby, the year losses are 26 years (65 years
old minus 39 years). The discount rate is 6% (legal actuarial rate of interest applied
in Puerto Rico's personal damages) and the probability of being employed is 0.685.
The average wage was deflated by the implicit price of consumer goods published
by the PRPB.
R.1.a Domestic Disputes
Other victim losses are those caused by domestic disputes or violence. Basic
information data came from http://www.tendendaspr.com. 12 The number of
incidents extends from 1988 to 2006. In the Trauma Center of Medical Hospital
of Puerto Rico each violence episode for any intermediated outpatient costs
$1,000 to $1,200 per day (2005 prices). The yearly rate of change was taken
from the Consumer Price Index of Medical Services (1984=100) published by the
Department of Labor and Human Resources. The data were converted to 2000
price base. Table 22 portrays the cost estimation for domestic disputes.
12
Cited by the Division of Statistics, Police Department of Puerto Rico.
56
Table 22
Costs of Domestic Violence at 2000 prices. Millions
Year
S
1988
1989
1990
Domestic
Violence
(incidents)
9,260
2,017
13,528
Cost per day / per
episode
(at 2000 prices)
$575
$590
$605
Cost of Domestic
Dispute
(millions $)
$5.33
$1.19
$8.19
1991
13,410
$687
$9.21
1992
14,642
$750
$10.99
1993
17,873
$759
$13.57
1994
18,079
$777
$14.04
1995
19,411
$803
$15.59
1996
19,132
$838
$16.03
1997
21,217
$866
$18.37
1998
21,084
$882
$18.60
1999
20,200
$926
$18. 70
2000
18,271
$947
$17.31
2001
17,770
$967
$17.18
2002
20,075
$996
$19.99
2003
21,164
$1,034
$21.89
2004
22,274
$1,078
$24.02
2005
22,718
$1,100
$24.99
2006
20,965
$1,137
$23.83
Sources: http://www.tendenClaspr.com; Puerto RlCO PollCe Department and calculatlOns by the
authors.
R.2
Public and Private Cost of Justice
The costs of public justice were taken from the annual Budget of the
Commonwealth Budget of Puerto Rico, for the years 1996 to 2006. The following
agencies are related to public justice:
1.
2.
3.
4.
5.
Departamento de Justicia (Department of Justice)
Junta de Libertad bajo Palabra (Borrad of Conditional Liberty)
Tribunal General de Justicia (General Court of Justice)
Policia de Puerto Rico (Department of Police, Puerto Rico)
Administracion de Instituciones Juveniles (Juvenile Institutions
Administration).
6. Oficina del Fiscal Especial Independiente (Independent Special
Prosecutor's Office).
7. Sistema de Correcion (Correctional System).
8. Oficina con Antelacion al Juicio (Pre-trial Services Office).
57
The annual expenditures for years beyond the 1996 to 2006 are extrapolated by
the annual average growth rate of per capita expenditures of 6.3%.
R.3. Private Defensive Expenditures of Crime losses, Prevention/Detection
R.3.a. Retail losses due to fraud, theft and shoplifting
The National Retail Federation estimated that shoplifting cost to retailers
around $10.23 billion in 2001, up from $8.45 billion in 2000. Even though
retailers continue to invest in new programs and technology to combat crime in
their stores, dollar losses from theft and fraud are still at an all-time high.
The latest National Retail Security Survey (Hollinger, 2007) found that retail
shrunk an average of 1.61 percent of retail sales in 2006.
According to this
survey, the majority of retail shrinkage last year was due to employee theft,
reaching $19.5 billion, of which almost half (47%) were losses. Shoplifting
accounted for $13.3 billion, or about one-third (32%) of losses. Other losses
included administrative errors ($5.8 billion and 14% of shrinkage) and vendor
fraud ($1.7 billion and 4% of shrinkage).
In order to estimate local cost figures on this subject, the following
procedures were established:
(a) Estimate a time-series of retail sales from 1970 to 2006. A new
figure was published by the local Department of Trade and Export
since 2004.
(b) Old series of retail sales went from 1991 to 2006. It was found that
the new series is 1.80 the old series (year 2004 and 2005), so, the
new series for years 1991 to 2003 was estimated, using this
parameter value.
58
(c) In order to estimate the retail sales figures from 1970 to 199·0, the
annual rate of change of the new retail sales per capita (4.09%) was
forecasted.
(d) The per capita sales for years 1970 to 1990 was multiplied by the
population size to derive the retail sales for these years.
(e)
Retail losses due to fraud, theft and shoplifting were assumed at
1.6% of total retail sales.
(f)
Finally, the figure was deflated by the implicit price deflator for
personal consumer expenditures at 2000 prices.
R.3.b. Home and Business Expenditures in Security Systems
A higher level of crime also leads to an increase in either family or business
expenditures in security systems, devices, software, and equipment. For instance,
in 1996, Americans installed 23.8 million alarms, in which 55 %were residential. A
Survey from Park Associates 13 found that the number of American homes with
security systems increased from 7% in 1988 to 22.3% in 2005.
The following procedure was assumed to estimate the expenditures on
residential and business security systems:
(a)
The number of families was estimated by dividing total population
by 3.2 members per family;
(b)
The same percentage of United States families buying security
systems was assumed;
(c)
The cost of a security system was $150 per family in 2000, and
adjusted at an inflation rate of 5%.
For business expenditures, we have the following assumptions:
(a)
The number of establishments was set to 53,418 in 2004; the rate of
growth is 1% per year.
13
Parks Associates, Home Security Update, 2Q 2005. (www.parksassociates.com)
59
(b)
The rate of businesses with security systems is three times that of
families.
(c)
The cost per business was $1,500 at 2000, and the rate of inflation
was set as 5% per year.
(d)
Finally the total cost is the sum of household expenditures as well as
that of businesses, deflated to year 2000 prices.
R.3.c. Private Security Guards and Private Investigators
The social cost of private security guards and investigators was estimated using
the County Business Patterns published by the U.S. Census Bureau. 14 The basic
figure was payroll payments of industrial sectors providing security services.
Figures from 1970 to 1992 were estimated by extrapolating backward the figure of
1992, at an annual rate of change of 8% (average rate of growth from 1992 to
2004). These figures were deflated by the implicit price for personal consumption
of services at 2000 prices.
R.3.d. Burglary and Theft: premiums and losses paid
Total written premiums and losses paid by insurers due to burglary and theft
are also considered a cost of crime. Data from 1997 to 2005 was obtained from the
Office of the Commissioner of Insurance. Data for other years were calculated by
extrapolating the average per capita value of $0.46 per person, and then deflated
by the implicit price index of PCE at 2000 prices.
R.4.
Offense to Society
R.4.a. Drug trade and trafficking
One of the most seizure markets in the economy of Puerto Rico is the illegal
drug trade. Drug smuggling, trafficking, and violence-- as a by-product --are
conducted mainly in the "drug trading-spots".15
There is no doubt that Puerto
Rico is still being used as a transshipment port for illegal drugs, primarily to the
14 Reports from 1992 to 2004 for Puerto Rico are available on the Web page of the U.S.
Census (http://www.census.gov/epcd/cbp/download/cbpdownload.html).
15 In Spanish "puntos de droga".
60
United States.
The value of traded cocaine once reached high of $20 billion in
2000, of which $4 billion were consumed locally, and the remainder of $16 billion
was re-exported.
On the basis of a 1997 Congressional Testimony of the Drug
Enforcement Administration (DEA) by Thomas A. Constantine 16 , it was stated:
rrPuerto Rico's 300-mile coastline, the vast number of isolated
cays and 6 million square miles of open water between the U.S.
and Colombia, make the region difficult to patrol and make it
ideal for land, sea and air smuggling of drugs, weapons, illegal
aliens and currency. Puerto Rico is also a significant air and sea
transportation port in the Caribbean for travelers destined for
the United States. It has the third busiest seaport in North
America and the 14th busiest in the world. More than 75 daily
commercial flights arrive in the Continental United States from
Puerto Rico and it is also a major port for commercial maritime
shopping. The traffickers' biggest asset is the sheer volume of
the commercial trade."
"Today, cocaine and heroin traffickers from Colombia have
transformed Puerto Rico into the largest staging area in the
Caribbean for smuggling Colombian cocaine and heroin into the
U. S. The municipalities in the central mountain range and the
south coast provide the bases of operation for the command
and control functions of the Colombian syndicates".
A 2000 DEA Testimony to the U.S. Congress by Robert Vigil reaffirmed:
" More than ever, international drug trafficking organizations
utilize Puerto Rico as a major point of entry for the
transshipment of multi-ton quantities of cocaine being
smuggled into the United States. Puerto Rico has become
known as a gateway for drugs destined for cities on the East
Coast of the United States. "
According to a local newspaper article 17 , about 1,500 rrillegal drug trading
spots" operate in Puerto Rico. In one hundred (100) trading spots located in six
housing projects 18 in the San Juan metropolitan area, the sales per spot reached
$703,000 weekly. In order to estimate the illegal drug sales, it was assumed that
all trade-spot sales were at 90% of this amount, with an annual inflation rate of
Puerto Rico and Law Enforcement Efforts in the Caribbean Region.
(http://www.usdoi.gov/dea/pubs/cngrtestlct970403.htm
17 Hernandez Alejandra, Llueve dinero en puntos de droga de PR: Millonarias las ganancias anuales; .§
Nuevo Dia; 14 de septiembre de 2006.
18 In Spanish housing projects are called as caserios.
16
61
5%. The estimated sales are finally deflated by the implicit price indeX' of
personal consumption expenditures at a 2000 price base.
R.4.b. Illegal Gaming
In 2006, legal gaming in Puerto Rico was about $4.3 billion; $272 million (6.3%)
in legal lotteries (Pega 2; Pega 3; Pega 4; La Revancha; Lotto, and traditional
lottery); $3.0 billion (69%) in Casinos and Slot machines; and $1.0 billion (23%) in
horse-racing and cockfights. According to the local state police, illegal gaming is
composed by "la bolita" (illegal lottery) and a similar amount of legal lotteries is
devoted to illegal bets. In 2006, "la bolita" amounted to $300 million, while illegal
bets reached $200 million, for a total sum of $500 million. To calculate the year to
year figure, an inflation rate of 5% was assumed, and then deflated by the implicit
price index of personal consumption at 2000 prices.
R.4.c. Illegal Selling of New Technological Products C'Piracy").
The era of information technology has transformed many industrial societies as
well as economic sectors, but at the same time created new waves of racketeering
or underground sales. The infringement copyright material, violation of property
rights by selling DVDs, music and movies illegally; CD's; software; devices; and
taking illegal signals from Cable Channels are well-know. A study by the Business
Software Alliance 19 found that a decrease of 10 points in the piracy rate (lowering
from a rate of 46% to 36%); will increase the legal sales from $575 million to $850
million. This means a total market size of $1,065 million, of which the illegal
segment is close to $490 million. No information about market size from other
illegal trade sales is known. A good guess is that illegal trade of new technological
products is about $245 million or half of the illegal segment.
This figure was
increased at an inflation rate of 5% each year, and then, deflated by the implicit
price index of personal consumption at 2000 prices. Since this type of crime is a
by-product of the new technological-digital wave, the estimates were considered
19
See http://www.bsa.org/idcstudy/pdfs/Puerto_Rico_Spanish.pdf
62
from 1995 to 2006. From 1990 to 1995, this cost was assumed to be half' of the
forecasted figures.
R.5 Total Cost of Crime.
Given the previous cost items, the sum will be considered as the total cost of
crime. Table 23 and Graph 3 depict the total cost of crime from fiscal years 1970
to 2006. By 2006, for instance, the total cost of crime amounted $4,147 millions,
while $3,435 millions by 1996. This means an annual rate of growth of 1.9%
Table 23
The Total Cost of Crime at 2000 Prices. Millions $
Fiscal
Years
Total Cost of Cri me
(Millions $; 2000 prices)
Fiscal Years
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
$1,976.8
$2,148.8
$2,345.2
$2,526.4
$2,527.2
$2,337.2
$2,255.4
$2,265.5
$2,304.2
$2,301.5
$2,198.9
$2,211.2
$2,179.9
$2,144.8
$2,313.6
$2,491.0
$2,735.1
$2,614.0
$2,712.4
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Source: this study. For a full disclosure of cost items see Appendix B.
I
II!
,'I
'
I
63
Total Cost of Crime
(Millions $; 2000
prices)
$2,620.2
$2,846.0
$2,964.0
$3,090.2
$3,207.8
$3,320.4
$3,342.3
$3,434.7
$3,626.4
$3,641.0
$3,698.1
$3,679.5
$3,790.5
$3,861.9
$3,945.8
$4,014.0
$4,223.6
$4,147.6
Graph 3
Total Cost of Crime at 2000 prices
$4,500.0
-r-----------------------------------,
$4,000.0
y = 59.926x + 1781.5
R2 = 0.8857
$3,500.0
$3,000.0
$2,500.0
$2,000.0
$1,500.0
$1,000.0
$500.0
Source: Table 23
64
III.
Index of Sustainable Economic Welfare (ISEW).
This section shows the results of the modified ISEW for Puerto Rico, which
incorporates the cost of crime. In 2000 the ISEW per capita amounted $3,653,
which is the highest benchmark ever reached since 1970. In 2006, the ISEW per
capita reached $2,509, which represented a value loss of $1,144 per person or a
negative annual rate of growth of -6.7%. As can be seen at Table 24, Columns 1 and
2, the cost items have growing faster than PCE plus positive items (Col 1). From
2000 to 2006, Col.1 grew at 6.3% while Col. 2 did so at 25%.
On the other hand, the cost of crime has rocketed since the inception of the
2000 decade. In 2004, the cost of crime reached a record value of $4,014 million,
about 32% of total ISEW; and about 42% by 2006 (See Table 25).
Crime is an
industry accounting for big businesses which contribute, at least, indirectly to GDP
and income figures. Despite of this high level of crime, which implies a huge
amount of underground income circulating into the economy, this condition cannot
be understood automatically as an increase of the economic welfare of local
residents. Crime is a cost to the economy rather than a social benefit.
Finally, Table 26 and Graph 4 compare the ISEW per capita and the GNP per
capita, both at 2000 prices. Graph 5 portrays the annual rate of growth of both
series. The real GNP per capita figure depicts a constant increase since 1982, but
the ISEW per capita showed a downward trend. By the mid 1980's, the value of
ISEW was nearly half of the real GNP per capita, but in the 2000's, it represented a
quarter of real GNP per capita.
65
Table 24
Index of Sustainability and Economic Welfare for Puerto Rico: 1970 to 2006.
2000 prices
Fiscal
Year
Col. 1
PCE+ Adding
Items (millions $)
Col. 2
Minus: Cost Items
(millions $)
Col. 3 = Col. 1
minus Col. 2
ISEW (millions $)
Col. 4
Population
Col. 5 = Col. 3
+ Col. 4
ISEW per capita
1970
$16,114.6
$7,304.0
$8,810.6
2,712,033
$3,249
1971
$17,492.5
$8,025.2
$9,467.2
2,756,977
$3,434
1972
$18,509.7
$8,670.5
$9,839.1
2,802,667
$3,511
1973
$19,901.0
$9,313.5
$10,587.5
2,849,113
$3,716
1974
$19,696.5
$9,266.2
$10,430.3
$3,601
1975
$19,951.5
$8,951.6
$11,000.0
2,896,329
2,944,328
1976
$20,722.9
$9,415.3
$11,307.6
2,993,122
$3,778
1977
$21,443.2
$9,976.1
$11,467.1
3,042,725
$3,769
1978
$22,023.0
$10,587.6
$11,435.4
3,093,150
$3,697
1979
$23,136.8
$22,821.4
$10,970.5
$10,741.2
$12,166.2
3,144,410
$3,869
1980
$12,080.2
3,196,520
$3,779
1981
$22,674.1
$10,916.0
$11,758.1
3,230,681
$3,640
1982
$23,014.2
$10,705.0
$12,309.2
3,265,207
$3,770
1983
$23,558.9
$10,950.5
$12,608.4
3,300,103
$3,821
1984
$24,328.3
$11,880.5
$12,447.8
3,335,371
$3,732
1985
$25,259.4
$12,730.6
$12,528.8
3,371,016
$3,717
1986
$25,983.5
$13,513.3
$12,470.2
3,407,042
$3,660
1987
$26,678.3
$14,173.5
$12,504.8
3,443,453
$3,631
1988
$27,599.9
$14,838.3
$12,761.7
3,480,253
$3,667
1989
$27,599.4
$15,136.5
$12,462.9
3,517,446
$3,543
1990
$29,015.4
$15,892.9
$13,122.4
3,555,037
$3,691
1991
$28,692.5
$16,038.0
$12,654.6
3,579,615
$3,535
1992
$28,923.7
$16,848.0
$12,075.8
3,604,364
$3,350
$3,446
$3,736
1993
$30,546.7
$18,041.9
$12,504.8
3,629,283
1994
$31,907.2
$19,104.0
$12,803.1
3,654,375
$3,504
1995
$32,906.8
$20,281.4
$12,625.4
3,679,640
$3,431
1996
$34,234.3
$21,328.5
$12,905.9
3,705,080
$3,483
1997
$35,474.2
$22,743.0
$12,731.3
3,730,695
$3,413
1998
$36,289.2
$23,655.8
$12,633.5
3,756,488
$3,363
1999
$37,789.5
$25,159.0
$12,630.5
3,782,459
$3,339
2000
$39,497.6
$25,583.9
$13,913.7
3,808,610
$3,653
2001
$39,818.4
$26,195.4
$13,623.1
3,839,190
$3,548
2002
$40,073.0
$27,220.9
$12,852.0
3,859,606
$3,330
2003
$40,754.6
$28,099.3
$12,655.3
3,877,881
$3,263
2004
$41,984.0
$29,275.9
$12,708.2
3,895,101
$3,263
2005
$42,345.6
$31,252.7
$11,092.8
3,911,810
$2,836
2006
$42,076.9
3,927,776
$2,509
$32,220.9
$9,856.1
Sources: U.S. Census of PopulatlOn (http://WWW/1P.goblerno.pr) and calculatlOn from thIs study.
66
Table 25
Index of Sustainability and Economic Welfare and the Cost of Crime:
1970 to 2006
Fiscal Years
Cost of Crime
(Millions $)
$1,976.8
$2,148.8
Ratio of Cost of
Crime to ISEW
22.4%
22.7%
1971
ISEW
(millions $)
$8,810.6
$9,467.2
1972
1973
1974
$9,839.1
$2,345.2
23.8%
$10,587.5
$10,430.3
$2,526.4
$2,527.2
23.9%
24.2%
1970
1975
$11,000.0
$2,337.2
21.2%
1976
$11,307.6
$2,255.4
19.9%
1977
1978
1979
$11,467.1
$11,435.4
$12,166.2
$2,265.5
$2,304.2
$2,301.5
19.8%
20.1%
18.9%
1980
1981
$12,080.2
$11,758.1
$2,198.9
18.2%
$2,211.2
18.8%
1982
1983
$12,309.2
$12,608.4
$2,179.9
17.7%
17.0%
1984
1985
$12,447.8
1986
1987
1988
1989
$2,144.8
$2,313.6
$12,528.8
$12,470.2
$2,491.0
$12,504.8
$12,761.7
$2,614.0
$2,712.4
$12,462.9
$2,735.1
18.6%
19.9%
21.9%
20.9%
21.3%
21.0%
1990
1991
$13,122.4
$2,620.2
$2,846.0
$12,654.6
$2,964.0
23.4%
1992
1993
$12,075.8
$12,504.8
$3,090.2
$3,207.8
25.6%
1994
$12,803.1
1995
$12,625.4
$3,320.4
$3,342.3
25.9%
26.5%
1996
1997
$12,905.9
$12,731.3
$3,434.7
$3,626.4
26.6%
28.5%
1998
$12,633.5
$12,630.5
$13,913.7
$3,641.0
28.8%
1999
2000
$3,698.1
$3,679.5
2001
$13,623.1
$3,790.5
26.4%
27.8%
2002
2003
$12,852.0
$3,861.9
$3,945.8
30.0%
31.2%
$4,014.0
31.6%
21.7%
25.7%
29.3%
2004
$12,655.3
$12,708.2
2005
$11,092.8
$4,223.6
38.1%
2006
$9,856.1
$4,147.6
42.1%
Source: thIs study
67
Table 26
ISEW and real GNP per capita in Puerto Rico: 1970 to 2006
Year
ISEW per capita;
2000 prices
GNP real
2000 prices
1970
$3,249
$6,832
1971
$3,434
$7,145
1972
$3,511
$7,323
1973
$3,716
$7,566
1974
$3,601
$7,636
1975
$3,736
$7,406
1976
$3,778
$7,400
1977
$3,769
$7,521
1978
$3,697
$7,719
1979
$3,869
$8,026
1980
$3,779
$8,032
1981
$3,640
$8,006
1982
$3,770
$7,694
1983
$3,821
$7,419
1984
$3,732
$7,630
1985
$3,717
$7,796
1986
$3,660
$8,000
1987
$3,631
$8,268
1988
$3,667
$8,568
1989
$3,543
$8,822
1990
$3,691
$8,962
1991
$3,535
$8,976
1992
$3,350
$8,979
1993
$3,446
$9,181
1994
$3,504
$9,277
1995
$3,431
$9,471
1996
$3,483
$9,864
1997
$3,413
$10,006
1998
$3,363
$10,253
1999
$3,339
$10,612
2000
$3,653
$10,877
2001
$3,548
$10,984
2002
$3,330
$10,885
2003
$3,263
$11,062
2004
$11,312
$3,263
2005
$2,836
$11,481
2006
$2,509
$11,508
Source: thIs study and Commonwealth Planmng Board
68
Annual rate of growth
ISEW per capita GNP per capita
5.7%
2.2%
5.9%
-3.1%
3.7%
1.1%
-0.2%
-1.9%
4.7%
-2.3%
-3.7%
3.6%
1.3%
-2.3%
-0.4%
-1.5%
-0.8%
1.0%
-3.4%
4.2%
-4.2%
-5.2%
2.8%
1.7%
-2.1%
1.5%
-2.0%
-1.4%
-0.7%
9.4%
-2.9%
-6.2%
-2.0%
0.0%
-13.1%
-11.5%
4.6%
2.5%
3.3%
0.9%
-3.0%
-0.1%
1.6%
2.6%
4.0%
0.1%
-0.3%
-3.9%
-3.6%
2.8%
2.2%
2.6%
3.4%
3.6%
3.0%
1.6%
0.2%
0.0%
2.3%
1.0%
2.1%
4.2%
1.4%
2.5%
3.5%
2.5%
1.0%
-0.9%
1.6%
2.3%
1.5%
0.2%
Graph 4
ISEW per capita and GNP per capita (2000 prices)
Index (1970 =100)
1.8000.,.-----------------------------..,
1.6000 - - - - - - - - - -
1.4000
+--------------------~'-----------___j
1.2000
+-----------..:------~----------------1
1.0000
0.8000
+----------------------------~
-ISEW per capita
-GNP real per capita: 2000 prices
0.6000 + - - - - - - - - - - - - - - - - - - - - - - - - - - - - - _ _ _ j
0.4000
0.2000 + - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - j
0.0000
+-r--r-,-...,.-,......,.--,-...,-.,--,__;_-,-_,__,..__r--,-~.,.___,__;__r__,__,..__r_,_~.,.___,__,_...,.__r_r_r_,_~,...._!
~~~~~~~~~~~~~*~~~~~
,,~ ,,~ ,,~ ,,~ ,,~ ,,~ ,,~ ,,~ ,,~ ,,<:15 ,,<:15 ,,<:15 ,,<:15 ,,<:15 ~ 'l,(S ~ ~
,,~
Source: Table 26
69
Graph 5
Rate of Growth
ISEW per capita and GNP per capita
15.0% , . . . - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ,
10.0% + - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1
5.0% + - \ - 1 1 - - - - - - - - - - - - - - - - - - - - - - - - 1 - - 1 - - - - - - 1
-5.0% 4 - - - - - - - - - - - - - - - - - - - - 3 1 1 - - - - - - - - - \ - 1 - - - - 1 - - - - 1
--ISEW per capita
-
- Rate of Growth GNP real per capita
-10.0% + - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1 - - - - 1
-15.0%
.L-
----J
Source: Table 26.
70
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74
APPENDIX A
GRAPHS ISEW AND GOP
International Comparison
Sources
Castaneda, Beatriz E. 1999. An index of sustainable economic welfare (ISEW) for
Chile. Ecological Economics. Vol. 28. Pages: 231-244.
Clark, Matthew and Sardar M. N. Islam. 2005. Diminishing and negative welfare
returns of economic growth: an index of sustainable economic welfare (ISEW) for
Thailand. Ecological Economics. Vol. 54. Pages: 81-93.
Jackson, Tim and Nat McBride. 2005. Measuring Progress? A review of 'adjusted'
measures of economic welfare in Europe. Center for Environmental Strategy.
University of Surrey, United Kingdom.
http://www.belsPo.be/frdocfdd/nl/Pubnllsympnlls2006prospnllMeasuring%20Progress%20f
inal.pdf
75
Graph A-1
ISEW and GOP for Chile
1,000,000
.r----
900,000
J
I
800,000
700,000 ..
600,000
500,000
300,000
200,000 .
100,000
o·
1965
1970
1980
1975
1985
1990
1995
Yea,.
I~GDf>/per capita
i
I
'~.ISEW~!':(~.t:;.<1I~..i
. - I.SEW /. per capita
1
Fig, 7. The impact of intenlittional position on the ISE\V (lSE\V-IP) for Chile. 1965····1995,
Source: Castaneda (1999).
76
Graph A-2
ISEW Components for Chile
Positive contributions
9,000
Defensive costs and
Environmental degradation
8.000
7,000
§
8- 6.000
0
0)
~
5.000
.~
i
4.000
3,000
Long-term environmental costs
2.000
ISEW
1.000
0
1965
1970
1975
1980
Year
1985
1990
1995
Source: Castaneda (1999).
Graph A-3
ISEW and GOP per capita for Thailand (1988 prices)
60000.------
_
50000+---,
40ooo-+----------
---:7"F""--
......
30000+---------_
_
•
~-
_
...-_ "....
_
-_
. ._.
. _ _- ...._-..-....-.--,--=:,""
.. -".-.-.~..-..'='""'--=_
10000+-----..
-;,.--:=--='-''''"'''--'
-;:7-",=-...-
......-......•.....
20000+----._,..... -=•.-...--...;:-.""
....- ''"""-"'''''"-'=
•........•. -..
...... -
,W
..
...-
~.-.---• • - . .> •.• =
y._-..-
_ ••. - . . - . - •.~
y ••- . . . . . . _ . , ' . . . -
O-f--r~.----r--r~.----,--r-.----r--r~.----,--r~c---r----,---._-r----,---,c---r----,---._-r---,
,~"=>,~<o$'''' ,<~}'b,,~"1>,o,<§>,,"1>9:>" ~#-,,""""\o,'tl",0,4'~#,0,.[;-,,<§'J>,0,9:>0,"o,<:§>"o,'C!>""o,q,'l-"o,o,",,"1>"!1'"-,q,o,"=>"q,<:!P.f;;¢ ,0,<:!P"o,<f!'
---ISEVV per capita (1988 prices) - ..- GOP per capita ClS/8S prices)
Source: Clarke and Islam (2005).
77
Graph A-4
ISEW and GOP per capita in Austria
Source: (Jackson and McBride, 2005). ISEW versus GOP per capita in Austria 19551992.
Graph A-5
ISEW and GOP per capita in United States
Source: (Jackson and McBride, 2005). ISEW versus GOP per capita in the United States;
78
1950-1990.
Graph A-6
GPI and GOP per capita in United States
Source: (Jackson and McBride, 2005). Figure 14. GPI and GDP per capita in the United States.
Graph A-7
ISEW and GOP in Chile
Source: (Jackson and McBride, 2005). ISEW versus GDP per capita in Chile 1965-1995.
79
Graph A-8
ISEW versus GOP per capita in Germany
Source: (Jackson and McBride, 2005). ISEW versus GOP per capita in Germany 1950-1990.
Graph A-9
ISEW versus GOP per capita in Italy
Source: (Jackson and McBride, 2005). ISEW versus GOP per capita in Italy 1960·1990.
80
Graph A-10
ISEW versus GOP per capita in Scotland
Source: (Jackson and McBride, 2005). ISEW versus GDP per capita in Scotland: 1984·1990.
Graph A-11
ISEW versus GOP per capita in Sweden
Sourcc: (Jackson and McBride, 2005). (SEW versus GDP pcr capita in Sweden 1950- 1992.
81
Graph A-12
ISEW versus GOP per capita in United Kingdom
Source: (Jackson and McBride, 2005). ISEW versus GDP per capita in UK 1950-2000.
82
APPENDIX B
Table B-1
Total Cost of Crime at 2000 prices: Fiscal Years 1970 to 2006
If
Domestic
Violence
Drug
trade
Points
Sales
Illegal
Gaming
Piracy
Total Cost
Crime
2000
prices
0
2000
prices
$484.6
2000
prices
$257.7
2000
prices
$0.0
2000
prices
$1,976.8
$2,148.8
1970
264.4
Present
Value (6%)
$139.5
$398.6
2000
prices
$277.1
$0.12
$50.8
Burglary
and
Theft;
premiums
writtens
and
losses
paid
2000
prices
$4.5
1971
317.4
$205.1
$116.0
$418.5
$282.5
$0.44
$53.4
$4.4
0
$490.3
$260.8
$0.0
1972
424.9
$230.3
$124.6
$447.4
$290.3
$0.46
$57.2
$4.5
0
$499.8
$265.8
$0.0
$2,345.2
1973
503.2
$302.4
$123.3
$469.2
$293.9
$0.48
$59.6
$4.3
0
$502.6
$267.3
$0.0
$2,526.4
Years
Stolen
property
and
damages,
2000 prices
Foregone
productivity
Foregone
productivity
(PV=6%)
Court Justice
System
Retail
Losses
thefts,
fraud and
shoplifting
Expenditures
families and
business in
alarms
system
Private
Security
Guards and
Private
Investigators
death by BAC
=.08 >
$99.5
2000 prices
2000 prices
2000 prices
1974
501.5
$369.8
$119.5
$462.5
$280.3
$0.49
$60.5
$4.1
0
$475.6
$252.9
$0.0
$2,527.2
1975
397.5
$366.1
$140.4
$443.0
$259.0
$0.47
$58.5
$3.7
0
$436.4
$232.1
$0.0
$2,337.2
1976
341.2
$308.3
$161.9
$459.5
$258.4
$0.47
$59.6
$3.5
$432.5
$230.1
$0.0
$2,255.4
1977
303.6
$319.4
$150.9
$488.0
$264.8
$0.48
$61.6
S3.4
·0
0
$439.6
$233.8
SO.O
$2,265.5
1978
315.9
$326.2
$140.7
$505.2
$269.4
$0.49
$63.7
$3.3
0
$443.5
$235.9
$0.0
$2,304.2
1979
331.8
$315.0
$156.2
S479.7
$270.5
$0.48
$66.5
$3.2
0
$442.7
$235.4
$0.0
$2,301.5
1980
300.5
$306.5
$174.0
$462.0
$255.3
$0.47
$64.3
$2.9
0
$413.2
$219.7
$0.0
$2,198.9
1981
316.3
$331.8
$188.4
$455.7
$245.2
$0.45
$62.0
$2.6
0
$397.4
$211.4
$0.0
$2,211.2
1982
340.3
$300.6
$172.4
$448.2
$244.9
$0.47
$63.5
$2.5
0
$396.3
$210.8
$0.0
$2,179.9
1983
336.5
$253.9
$144.0
$471.7
$250.5
$0.49
$65.3
$2.4
0
$404.7
$215.3
$0.0
$2,144.8
1984
390.7
$284.0
$145.4
$512.8
$261.5
$1.14
$69.6
$2.3
0
$421.8
$224.3
$0.0
$2,313.6
1985
461.7
$328.0
$143.9
$547.3
$269.1
$1.20
$73.7
$2.3
0
$433.3
$230.5
$0.0
$2,491.0
1986
523.4
$401.3
$161.9
$586.8
$282.6
$1.26
$79.3
$2.3
0
$454.4
$241.7
$0.0
$2,735.1
1987
450.1
$277.3
$149.6
$626.1
$295.5
$1.34
$85.3
$2.3
0
$474.3
$252.3
$0.0
$2,614.0
ii,'
..
t
b
<\'M'#We¥W·«(!f"#W.wW'ig"4#WiM,iiIM'W",r:;t,pe, n'T:"'?r":;'"
!Wf%
" I '
ttrtrr""",,.rmr&~.
...............Continuation Table B-1
Stolen
property
and
damages,
Foregone
productivity
Foregone
productivity
(PV=6%)
Court Justice
System
1988
451.6
$317.0
$149.1
$653.1
$302.0
$1.41
$89.2
$5.3
$484.0
$257.4
$0.0
1989
403.6
$242.5
$135.5
$680.0
$307.4
$1.68
$92.8
$2.1
$1.2
$491.8
$261.6
$0.0
$2,620.2
1990
514.8
$303.5
$126.5
$709.8
$314.7
$1.86
$94.6
$2.0
$8.2
$502.7
$267.4
$80.9
$2,846.0
2000 prices
Retail
Losses
thefts,
fraud and
shoplifting
Expenditures
families and
business in
alarms
system
Burglary
and
Theft;
premiums
writtens
and
losses
paid
$2.2
Years
Private
Security
Guards and
Private
Investigators
Domestic
Violence
Drug
trade
Points
Sales
Illegal
Gaming
Piracy
Total Cost
Crime;
2000
prices
Millions $
$2,712.4
1991
489.4
$402.0
$135.5
$731.5
$316.7
$1.91
$99.3
$2.0
$9.2
$506.9
$269.6
$170.3
$2,964.0
1992
506.8
$413.4
$138.6
$776.2
$327.9
$2.07
$106.0
$1.9
$11.0
$526.3
$279.9
$179.2
$3,090.2
1993
473.0
$445.7
$143.1
$826.8
$347.8
$1.77
$113.9
$1.9
$13.6
$548.6
$291.8
5188.7
$3,207.8
1994
474.0
$458.6
$145.4
$872.5
$360.2
$1.85
$124.3
$1.9
$14.0
$566.4
$301.3
$198.6
$3,320.4
$3,342.3
1995
438.9
$406.3
$149.5
$929.9
$358.8
$1.98
$134.6
$1.9
$15.6
$590.7
$314.2
$198.6
1996
446.0
$393.7
$122.4
$989.2
$373.9
$2.07
$147.8
$1.9
$16.0
$614.9
$327.0
$440.1
$3,434.7
1997
434.9
$362.5
$126.6
$1,160.1
$385.5
$2.70
$160.6
$2.2
$18.4
$635.1
$337.8
$463.2
$3,626.4
1998
426.3
$337.0
$130.6
$1,144.7
$401.0
$2.80
$174.9
$1.8
$18.6
$655.0
$348.3
$487.6
$3,641.0
1999
411.4
$272.4
$126.9
$1,219.1
$408.5
$3.05
$189.5
$1.8
$18.7
$683.4
$363.4
$513.3
$3,698.1
2000
370.1
$261.0
$127.7
$1,209.6
$415.6
$3.38
$204.2
$1.9
$17.3
$697.6
$371.0
$540.3
$3,679.5
2001
375.9
$270.2
$125.0
$1,277.4
$426.4
$3.62
$201.5
$1.3
$17.2
$712.9
$379.1
$568.7
$3,790.5
2002
390.4
$269.8
$125.0
$1,267.4
$436.2
$3.65
$206.0
$2.5
$20.0
$744.8
$396.1
$598.7
$3,861.9
2003
363.2
$261.9
$117.6
$1,325.7
$456.2
$3.79
$213.2
$1.4
$21.9
$770.9
$410.0
$630.2
$3,945.8
2004
306.9
$258.7
$108.2
$1,395.4
$475.4
$3.94
$216.0
$1.5
$24.0
5799.1
5425.0
$663.3
$4,014.0
2005
287.8
$239.6
$90.5
$1,599.0
$516.0
$4.17
$211.1
$1.9
$25.0
$815.0
$433.5
$698.3
$4,223.6
2006
272.4
$222.7
$92.1
$1,591.4
$478.0
$4.41
$205.7
$2.4
$23.8
$819.1
$435.6
$735.0
$4,147.6
Sources: See text
84

Index of Sustainable Economic Welfare for Puerto Rico

Transcription

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