Muhammad Dawood

Sustainable economic development involves balanced progress across three key dimensions: economic, social, and environmental. Measuring this development requires a comprehensive approach that integrates relevant indicators from all areas. Existing indices, such as the SDG Index (Sustainable Development Goals Index), PHDI (Planetary Pressures–Adjusted Human Development Index), and SDI (Sustainable Development Index), represent significant attempts to quantify sustainability, but each has certain methodological and content limitations when it comes to accurately measuring economic sustainability.

The SDG Index measures progress towards the 17 Sustainable Development Goals (SDGs) set by the United Nations and uses a broad range of indicators. While it provides a global overview, the index often treats the goals equally without sufficient contextual differentiation, which can limit its ability to identify specific challenges in sustainable economic growth. The PHDI, as a modified Human Development Index that considers planetary pressures (CO₂ emissions per capita and material consumption), represents an important step in integrating the ecological dimension. However, it still lacks sufficient structural economic indicators, such as productivity, investment capacity, and market resilience. The SDI, on the other hand, attempts to balance human development with ecological limitations, but it places a greater emphasis on global equity, often overlooking the internal dynamics of economic systems.

Given these challenges, the question arises as to whether there is a need for the development of a new composite index that would systematically encompass specific indicators of economic sustainability—including the quality and stability of jobs, income and wealth distribution, market resilience to shocks, debt levels, public and private investment, innovation capacities, and the introduction of circular and low-carbon economy principles. Such an index would need to be methodologically flexible, scalable, and contextually sensitive, with the ability to be adapted to national and regional specificities.

In conclusion, while existing indices provide valuable insights into various aspects of sustainable development, they are not fully adequate for accurately and operationally measuring economic sustainability. Therefore, there is a justified need for the development of a new or improved index that would comprehensively cover all three dimensions of sustainability, with particular emphasis on the structural elements of the economic system that enable long-term, inclusive, and environmentally responsible development.

This is an excellent question. One answer (among many possibilities) is that a comprehensive index of human well-being could integrate the three pillars of sustainability.

According to https://sdgs.un.org/, unece.org, and socio.health, measuring sustainable economic development is inherently complex because it must capture not only the level of economic activity but also the quality of the environment and the well‐being of people. No single indicator suffices; rather, researchers and institutions have converged on a conceptual framework that views long‐term sustainability as the interplay of four types of capital: economic, natural, human, and social. Here's a breakdown of how an effective combination can be structured:

1. Environmental Variables

These variables reflect the health and resilience of natural systems—the "natural capital" that underpins economic activity and human well‐being. Effective measures include:

• Resource Use and Ecosystem Health: Air and Water Quality: Indicators such as particulate matter, ozone levels, and water purity inform us about the degradation or preservation of natural resources. Biodiversity & Land Use: Measures of deforestation rates, species diversity, and land degradation help gauge whether ecosystem services remain intact over the long term. Carbon Emissions & Energy Mix: Tracking greenhouse gas emissions and the share of renewable energy in overall consumption reflects both environmental impact and the transition to a sustainable energy future.

These metrics show current environmental quality and the ecosystem's capacity to support future economic and social activities.

2. Social Variables

Social indicators capture the essence of human and community well‐being, often summarized as "human" and "social capital." Key variables include:

• Health and Education: Life Expectancy and Health Outcomes: Indicators such as mortality rates, incidence of chronic diseases, and access to healthcare services. Educational Attainment: Literacy rates, enrollment levels, and quality of education shape a nation's human capital.
• Equity and Social Cohesion: Income Distribution and Poverty Levels: Tools like the Gini coefficient and poverty headcounts help assess whether growth is inclusive. Social Capital and Well‐Being: Indices measuring trust, community engagement, and subjective well‐being contribute to understanding a society's social fabric.

Together, these variables provide insight into whether economic gains are converting into improvements in quality of life and opportunities for all population segments.

3. Economic Variables

Traditional economic indicators remain important; however, to capture sustainability, they must be adjusted for their environmental and social ramifications. Variables include:

• Productivity and Growth Adjusted for Externalities: Adjusted GDP or Gross Sustainable Development Product (GSDP): While GDP measures overall economic activity, GSDP refines this by subtracting environmental degradation costs and adding social benefits, thereby internalizing what conventional GDP overlooks. Capital Formation and Innovation: Investments in infrastructure, technological advances, and economic diversification (especially in green technologies) signal forward-looking economic resilience.
• Employment and Industry Composition: Job Quality and Sectoral Shifts: It is crucial to evaluate the growth in sectors that add long‐term value while minimizing environmental harm.

These variables allow policymakers to assess the scale of economic activity and its sustainability over time.

4. An Integrated Framework

A holistic approach often involves constructing composite indices that blend these environmental, social, and economic dimensions. For instance, frameworks proposed by international organizations (such as the UNECE/OECD/Eurostat approach) suggest combining:

• Natural Capital Indicators (e.g., resource depletion rates, emission levels)
• Social Capital Indicators (e.g., education and health indices, income distribution metrics)
• Economic Performance Indicators, but adjusted to account for externalities (e.g., GSDP rather than GDP)

Conclusion

No single combination of variables can claim to fully capture sustainable economic development; rather, effectiveness lies in synthesizing a broad set of indicators that measure:

• Environmental health (through quality and conservation metrics),
• Social well-being (through equity, health, and education indices), and
• Economic performance (refined to incorporate the costs or benefits of environmental and social changes).

This integrated framework provides a more comprehensive picture of sustainability and supports better policy-making by highlighting trade-offs and synergies among different areas.

Thank you. These are great insights—they will help me create an index by combining existing and new dimensions.