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In 2022, Phuong Dinh a Master in Management student, researched into alternatives for GDP and factors that are important for sustainable wealth. He came up with an adjusted GDP alternative, the Dinh Index.

History
In 2022, many governments still rely on GDP for taxation and social policy planning, including the U.S. White House and U.S. Congress use GDP numbers to plan spending and tax policy while the Federal Reserve uses GDP when setting monetary policy (BEA, 2022). GDP does not really account for Environment, Social, and Governance. It is mathematically-known that leisure, inequality, mortality, morbidity, crime, and the natural environment are some of the factors not incorporated in GDP (Jones & Klenow, 2016). Is a country with a high GDP, but with lots of poverty, truly wealthy? GDP interprets every expense as positive and does not distinguish welfare-enhancing activity from welfare-reducing activity (Cobb et al., 1995) so welfare reducing activities are included such as clean-up spend for oil spills. GDP does not take into account environment (and its destruction to achieve GDP) (Masood, 2016).

A Master in Management Student, Phuong Dinh, wanted to research into alternatives to GDP and why there has been no ubiquitous alternative for GDP being used, given all of GDP’s flaws, even though research into alternatives and proposals have been presented for many years. In Phuong’s research, he has found that the subjectivity of the variables in past alternatives as well as the complexity of the tabulation methods are two of the biggest impediments to the adoption of an alternative GDP.

Research Outcome and Methodology
As Phuong progressed with his research, he realized never before has anyone collected data to validate which variables are important to residents’ definition of sustainable wealth and this is relevant to overcome researcher-bias of past alternative to GDP methodologies. His thesis also derives an easily replicable tabulation method. Therefore, two big impediments to the adoption of an alternative to GDP are addressed in his research findings.

Main Hypothesis and Validation
It is hypothesized, like inflation, a basket of measures perceived to contribute to the wealth and wellbeing of an individual can be derived. Once this basket of wealth factors is determined, one can examine country-level data and aggregate the sustainable wealth measure. It is hypothesized, that countries with smaller populations and modest population growth rates fare better on the new sustainable real wealth measure. From past alternatives to GDP proposals and research, 62 variables were derived (many researchers cited the same variables). See Figure 1.

Figure 1: Variables used in alternatives to GDP with new variables in bold

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These 62 variables were assessed for importance to people’s perception of sustainable wealth. Survey was done with at least statistically significant sample size (n=30) of adult age population, belonging to 7 different regional breakdowns, totalling at least 210 participants. Variables with both high averages and low variance would be considered significant variables for consideration into an alternative to GDP. Hypothesis testing would be done. It was found that 18 out of 62 variables were important. Table 1 below summarizes. *These four variables do not have a P-value of at least 0.05 in both hypothesis test runs.

Determining the Dinh Index
A hypothetically easier transition to replacing GDP is to modify/greening the GDP because Sen argued for remaining close to mainstream economics and that without a ﬁnancial measure, a new measure would not be taken seriously (Masood, 2016). Therefore, the notable variables are converted into monetary-equivalents and a new alternative to GDP approach is the Dinh Index, which takes GDP and adjusts it with consideration of the 18 variables to produce the final adjusted GDP, which is the Dinh Index.

Countries by Dinh Index/Current Rankings
After computing the Dinh Index for 163 countries, some countries ranked by Dinh Index per capita are shown in Table 2. Source: own illustration

When looking at countries’ population size and Dinh Index, there appears to be no correlation (linear regression R2 = 0.002). Lower population growth rate is very weakly correlated with Dinh Index (R2 = 0.1355).

Findings
There are five variables that substantially impact final outcome in the Dinh Index for the countries, relative to GDP PPP. These variables are: healthy lifespan, worker’s rights, life satisfaction, energy, and employment. Countries that focus on keeping these in check while growing GDP would fare well in the Dinh Index computation. Countries that decreased most in ranking relative to GDP PPP ranking, after computing their Dinh Index are: Turkiye (-78), Bulgaria (-76), Botswana (-73), Russian Federation (-71), and Serbia (-65). With the exception of Turkiye, relatively poor performing healthy lifespan is a major contributor, life satisfaction, and worker’s rights seem to be causing these countries’ decrease in ranking. It has been observed that poor performing healthy lifespan has decreased the wealth by more than 50% in some of these countries. As an example, as of 2021, Russia is known for having relatively higher prevalence in alcohol-related diseases, HIV, cancer, amongst other health burdens (Starodubov et al., 2018). Turkiye suffers from bad employment, low life satisfaction, and poor worker’s rights, and may be related to its recent 2021 inflation and currency issues (Toksabay & Gumrukcu, 2021).

Future Research and Updates
GDP calculations does not account for impractical (one may bluntly say, useless) economic activity, leading to inflated GDP figures. The Dinh Index alleviates that by adjusting GDP to account for what people around the world find are important for sustainable wealth. Governments that want to improve their Dinh Index measure of sustainable wealth can initially concentrate on five variables: healthy lifespan, worker’s rights, life satisfaction, renewable energy capacity, and high employment. Countries that focus on keeping these healthy in check while growing GDP would fare well in the Dinh Index computation. Thereafter, these governments can try to improve on the other thirteen important variables

Out of 62 variables mostly derived from past research, the research has shown that 18 variables are relevant to people’s perception of sustainable wealth. These variables are then converted to international dollar equivalents to adjust the GDP PPP per capita (i.e. greening the GDP), leading to a repeatable methodology called the Dinh Index. Rather than relying on the GDP measure, with the use of the Dinh Index that is more inclusive and sustainable, policy makers can have a more sustainable impact and truly address what is real wealth to its residents.

This research has found the variables important for sustainable wealth as well as a replicable formula to modify the GDP because GDP alone is a flawed measure for leadership and country management. Governments should work to collect quality data and monitor these factors relevant to sustainable wealth, as these data are needed to input into Dinh Index formula. When it comes to public investment and return on investment, future studies and research can be done on whether incurring short-term government debt to improve the Dinh Index outcome (for example, providing free tertiary education) will result in longer-term sustainable wealth creation for countries.

Limitations
Future research, improvements in data standardization, and improvements in data collection can be done by relevant governments, think tanks, economic institutions, and NGOs. It is suggested that the global community have discussions around how to best track the 18 notable variables and ensure limited data gap so that the Dinh Index computation is possible with limited error. Another benefit of better monitoring of these 18 notable variables is policy makers can have a better view of the health of the economy beyond GDP.

The thesis may contain a margin of error due to limited data availability of the 18 notable variables but as data quality on the 18 notable variables improve, it is expected that the Dinh Index computation to improve in its potency to track sustainable wealth. Readers should caution that the Dinh Index computation results in this thesis are preliminary, and recalculation of these results in the future may change with improved data quality (thus lowered use of assumptions).