Sustainability and Stability

Lecture 11
International Business Analysis
Dr. Safa Riaz
Sustainability and stability perspectives holds that the economic environment
gives people a chance to enjoy long, healthy, and happy lives.
Sustainability
Green Economics:
● An economy is a component of, and dependent on the natural world.
● Relates to the social and ecological costs resulting from the activity
generating the growth.
● Ignoring such estimates can misestimates performance and misrepresents
potential.
Sustainability:
● Falls beyond the concepts related to accounting of gains and costs of growth.
● Helps gauge an economic environment
● “Meeting the needs of the present without compromising the ability of future
generations to meet their own needs.
● Examples are: Sweden, Switzerland, Norway, UK, NZ.
Indicators of sustainability:
1. Net National Product (NNP)
2. Genuine Progress Indicator (GPI)
3. Human Development Index (HDI)
1. Net National Product (NNP):

● Depletion of natural resources and degradation of the environment that result

from making and consuming products.
● Countries depreciate just like companies.
● Here, the focus is on the depreciation of a country’s assets in terms of their
wear and tear in generating growth.
2. Genuine Progress Indicator (GPI)

● Accounting frameworks are used similar to the one used for calculating GDP.
● Involves cost of reducing the environmental quality, health and hygiene,
livelihood security, equity, free times, and educational attainments.
● GPI will equal zero if the cost of pollution, crime, and family troubles equals
monetary gains from production of goods and services.
3. Human Development Index (HDI)

● Human development usually doesn’t show up in income and growth

measures.
● However, they will improve economic performance through better nutrition,
education, health care, and hygiene.
● Human development can measure the market potential in terms of physical,
intellectual, and social standards.
● Involves:
➢ Longevity (life expectancy at birth)
➢ Knowledge (adult literacy rate and combined primary, secondary, and tertiary
enrolment ratio)
➢ Standard of living (GNI per capita)
Stability
● Involves perspectives such as happynomics or welfare economics.
● Incorporates elements of psychology , health, security, and sociology.
● Redefine the traditional performance measures of wealth, income, profit to
principles of wellbeing p, quality of life, and life satisfaction.
Happynomics:
● Moves from the concept of financial prosperity to emotional prosperity.
● Example: constitution of Bhutan focuses on making its citizens happier not
richer. The goals include happiness of society, people’s satisfaction with their
lives and national wellbeing.
● Improves both stability and sustainability.
Stability Indicators:
● Stability indicators, such as happiness and the like, are difficult to measure.
● For example: happiness, like beauty is often in the eyes of beholder.
● Indicators such as enjoyment, depression, anxiety, sadness, stress are
difficult to pin down.
● Measuring such indicators can confuse economic analysis, however, an
unhappy citizen can be a leading indicator.
● Still, there are few indicators to estimate stability.
➢ Your Better Life Index (YBLI)
➢ Gross National Wellness Index (GNWI)
➢ Happy Planet Index (HPI)
➢ Happy Planet Index (HPI)

● Monetary measures are misaligned, overly emphasized while downplaying its

costly, destabilising, and often destructive externalities.
● Progress is to be defined not in terms of economic development, but through
success in achieving a sustainable wellbeing for all.
➢ Your Better Life Index (YBLI)

● Developed by Organization for Economic Cooperation (OECD).

● Evaluates economic performance in terms of matters which are believed to be
important by people worldwide.
● Such as, housing, social relationships, health, security, work family balance,
education.
● Directly measures wellbeing ad perceptions of living conditions.
● Helps to design better policies for better lives.
➢ Gross National Wellness Index (GNWI)

● Material and spiritual development occur side by side.

● One reinforces other, or both suffers.
● It reflects a country’s capacity to promote individual wellbeing.