Provides a forum for measuring the San Francisco Bay Area's progress toward the achievement of regional sustainability: a healthy environment, vibrant economy, and equitable society.

Bay Area Genuine Progress Indicator Methodology

Price deflator chain-type price deflators, recently developed by the U.S. Department of Commerce, is used to convert current dollar estimates into real dollars. All figures are expressed in 2000 chained dollars.

Per Capita Income (consumption) is the total private income made by residents in the Bay Area over fifteen years old, divided by the total population. This approach is reported in the US Census County Economic Tables 2000. From this, only the estimated percentage of private expenditures (75%) is added to the GPI in accordance with the national GPI accounts procedure.

Income equality index (IEI) is calculated in a similar manner to the national Gini coefficient as estimated by the US Census, except income ranges for each county are broken down into fewer (ten) categories due to limited data availability. The Gini index is the difference between actual distribution and equal distribution by income quintiles. The index ranges from 0.0, when every household has the same income, to 1.0, when one household has all the income. Thus the higher the Gini index the greater the income inequality, or the greater the portion of aggregate income earned by the top household income bracket. It incorporates detailed aggregate income shares data into a single statistic, which summarizes the dispersion across the entire income distribution. It compares current income distribution with an ideal equal distribution of aggregate income, giving equal weight to all income levels by calculating the square root of the sum of the squared differences of each quintile from a 20 percent share.

For the Bay Area GPI, Gini is pegged to the 1968 (1968=100) national figure to remain comparable to the national GPI accounts --1968 represent the lowest point of income inequality in the U.S. since 1950. When income becomes less equitably distributed relative to 1968 the IEI has more of an effect on the API. The calculation for the IEI is the county's Gini divided by 0.38 (US 1968 Gini) multiplied by 100. The following table gives a breakdown of the numbers.

Adjusted personal income (API) is per capita income divided the income equality index. Larger levels of inequality in a county result in a low weighted income. API is the base number used for calculating the remaining factors for GPI.

Housework is the value of housework estimated by multiplying the average wage for house work ($11.29/hour) in the Bay Area times the average number of hours of housework (1,237/year), multiplied by the number of households. Source: Bureau of Labor Statistics, Economic Profile by County (1999 Data) and US Census.

Work performed in households is more essential than much of the work done in offices, factories, and stores. Yet most of this goes unaccounted for in the national income accounts. While the housework and parenting of the stay-at-home mom or dad counts for nothing in the GDP, commercial childcare in the monetized "service sector" adds to the GDP. Other unpaid household labor, such as the physical maintenance of the housing stock (from cleaning to light repairs), also constitutes valuable economic activity. Despite all the "labor-saving" devices introduced during the past 80 years, the number of hours spent on housework has remained virtually unchanged.

Ironically and regrettably, the Bureau of Economic Analysis, which prepares the GDP, does not gather data on the time spent on the management of the national households, nor does the BEA estimate the economic contribution of these nonmarket time and services. This would seem to imply that we have forgotten the original meaning of the word economy: the management of the household or state.

Volunteer Work is estimated by multiplying the average wage in the region ($23.67) by the number of hours worked per year estimated to just over 3.6 hours a week per person, with only 44% of the population counted as volunteers. Much of the most important work in Bay Area is not done for pay. This includes not just the home, but also the broader realm of neighborhood and community. Work done here is the nation's informal safety net, the invisible social matrix on which a healthy market economy depends. Whether each additional lawyer, broker, or advertising account executive represents a net gain for the nation is arguable. But there is little question that workers in the underserved community and volunteer sectors-the churches and synagogues, civic associations and informal neighborly efforts-are doing work that is desperately needed.

Despite its crucial contribution, however, this work goes entirely untallied in the GDP. The GPI begins to correct this omission, much as it includes a rough estimate of work in the home. It is important to note that these estimates are conservative, because they do not include the informal neighborliness that does not involve a volunteer program or agency. See: "Volunteering in the US Summary" Bureau of Labor Statistic.

Forests and wetlands value is the estimated value of the ecological services (cleaning air, water, soil stabilization, fisheries nursery, etc.) provided by the region's wetlands and forests. Costs: Total lost wetlands (256,300 acres) and farm acreage in the Bay Area are estimated by multiplying the value of the land (wetlands: $14,650 farmland $5,900/acre) by the area lost in between 1998-2000. Benefits are calculated by multiplying the number of acres by the estimated value. Farm land acreage and loss: California Department of Conservation, "County Summary and Land Use by Category 2000." *This benefit is not included in the GPI national accounts, nor here. It is a suggested category for future inclusion. Value of wetland estimate is from the SF Bay Area Audubon.

Net Capital Investments (Consumer Durables) The money spent on durable items, such as cars, refrigerators, and other appliances, is not a good measure of the actual value consumers receive from them. It is important to take account, as well, of how long the item lasts. For example, when you buy a furnace or a dishwasher, you do not "consume" it in one year. The appliance (or "consumer durable") provides service for a number of years. Often durables wear out faster than they probably should, requiring more frequent replacement than if they had been manufactured for longer service life. Both repairs and new purchases drive up the GDP; but the household would have been better off-that is, it would have gotten more value-if the appliance had been engineered for higher quality and a longer service life.

The GPI treats the services of household capital as benefits and their initial purchase price as a cost. This column adds the annual services derived from consumer durables, which economic theory defines as the sum of the depreciation rate and the interest rate. If a product lasts eight years, it depreciates at 12.5 percent per year and thus provides that much of its service each year. At the same time, if the interest rate is 5 percent, the purchaser of the product could have received that much interest by putting the money into the bank instead. Economists therefore regard the interest rate as part of the monetary value of the product to the consumer. For example, the Department of Labor (1990) estimated 38 million volunteers in 1989, while the Independent Sector (1994) estimated 75.3 million volunteers, or almost twice as many. These differences are likely due to sampling methods. We have not attempted to estimate the potential cost of built-in obsolescence that some consumer durables may exhibit. Such a study would be a worthwhile albeit hypothetical inquiry.

The national average was used for this calculation. It is based on an assumed depreciation rate of 15 percent and an average interest rate of 7.5 percent, the value of services of household capital is estimated at 22.5 percent of the value of the net stock of cars, appliances, and furniture at the end of each year (BEA 1998c, table 1). To avoid double counting, we make an adjustment by subtracting out the actual expenditures on consumer durables. Focusing on the annual service that household appliances and equipment provide, rather than on the purchase price, corrects the way the GDP treats money spent as if it were the same as the value received from the durable good. The value of services from consumer durables is treated as a benefit and is thus an addition to the GPI account. In 1997, the benefits from household capital amounted to $5.6 trillion ($1996)

Value of roads is based upon the national GPI accounts due to a lack of data at the local level. The value of the services provided by roads is estimated to be 7.5% of the value of the capital stock. The sunk capital costs of roads are neither added nor subtracted.

The GPI does not include most government expenditures since they are largely defensive in nature; they protect against erosions in the quality of life, rather than enhancing it. This is particularly true of the government's largest budgetary item, military spending. On the other hand, some government activities, such as transit systems and sewer or water districts, provide services for a fee in a manner similar to private business. These fees show up in personal consumption figures in the national income accounts and thus are already included in column A. This leaves other government services that could be sold in theory, but are difficult to price with regard to individual users. Overwhelmingly, the largest item in that category is the use of streets and highways, which we include here as a separate category in the GPI.

The annual value of services from highways and streets is derived the Bureau of Economic Analysis figures of the net stock of federal, state, and local government streets and highways from 1950 to 1997. The annual value of services from streets and highways is estimated by taking 7.5 percent of the net stock value. This is based on the logic that around 10 percent of the net stock (2.5 percent for depreciation and 7.5 percent for average interest rates) is the estimated annual value of all services from streets and highways. However, since we assumed that 25 percent of all vehicle miles are for commuting (a defensive expenditure), this leaves 75 percent as net benefits. Thus the GPI assumes the net service value of streets and highways is 75 percent of 10 percent, or 7.5 percent of net stock. In 1997 we estimate the value of services from streets and highways at $90.0 billion, an addition to the GPI account.

Air pollution costs were derived from Hall et al. (1994) and personally communicated by the study project manager Dr. David Fairley. The study estimated the foregone benefit of exceeding air quality standards in the Bay Area. The 1990-1992 averages for air standard violations (CA) were compared to 1998-2002 averages; the 1992 costs estimates were adjusted accordingly to derive the GPI figures. The cost of air pollution in each county depends on the days of bad air quality days, which were multiplied by population in each county to obtain the cost of air pollution figure. See: The Economic Value of Quantifiable Ozone and PM10 Related Health Effects in the San Francisco Bay Area (1994)

Climate change cost is estimated by multiplying the amount of carbon dioxide emissions (in tons) by the cost associated with climate change gas emissions when precautionary principle approach is taken into consideration. CO2 emission data are from BAA data. Cost estimates per ton of CO2 are derived from: Howarth, Richard, 2000 (March)," Normative Criteria for Climate Change Policy Analysis"

Commuting-housing cost represents the economic value of the time spent commuting to and from work. This reflects the disparity in available housing and employment needs. The cost equals total travel time to work by county multiplied by the average hourly regional wage for the region. Travel time: US Census; Wages: BLS.

Crime cost is derived from total cost of policing by county as presented in the 2000 County and City Fact Book (US Census).

Durable products net value is estimated by the adding the value of services and deducting the sunk costs to obtain the capital stock of durables. Services are estimated to be worth 22.5% of the total stock value. Figures from the national GPI accounts were used to derive per capita estimates and multiplied by county population for the Bay Area GPI figure.

Family breakdown cost is the estimated cost of divorce on families and especially children and is from the national GPI accounts, adjusted to 2000 dollars and multiplied by the number of divorces in each of the nine Bay Area counties.

Loss of leisure time is estimated using the figure from the national GPI accounts multiplied by county population.

Municipal Solid waste cost is the total tonnage of solid waste sent to landfills by each county multiplied by the average tipping fee in the region. Not include in national GPI.

Natural resource depletion costs is the total value of money spent on fossil fuels (natural gas and gasoline, only) by county; at $1.71/gallon and 39cents/therm.

Net foreign lending-borrowing is derived from the national GPI accounts. The per capita debt in 2000 for the US is multiplied by each counties population to approximate, in the current situation, losses associated with holding debt.

*GPI categories associated with noise pollution, household air-pollution abatement, ozone depletion, and water pollution were not available locally and were based on national GPI averages. See: Cobb, Halstead, and Rowe, September 1995. The Genuine Progress Indicator: Summary of data and methodology. Redefining Progress; and forthcoming 2003 US GPI Update.

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