Steven Stone is acting director of the United Nations Environment Programme’s Office of Science

In 1934, American economist Simon Kuznets presented a paper to Congress advocating for a new way of measuring economic performance.

The United States was reeling from the Great Depression, and Kuznets – a future Novel prize winner – wanted to gauge just how badly the country’s economy had been dented.

His metric, which would come to be known as gross domestic product (GDP), was a breakthrough. But as pioneering as it was, Kuznets saw its limitations.

“The welfare of a nation can scarcely be inferred from a measure of national income,” he wrote in the 1934 paper.

Some nine decades on, we have largely forgotten that message. GDP has become a barometer of economic progress, a kind of one-number-that-rules-them-all upon which national policies turn and governments rise and fall.

With the climate crisis deepening by the day – as evidenced by the heatwaves and wildfires now searing Europe – our attachment to GDP is looking like a problem.

In a single-minded pursuit of GDP growth, humanity is inadvertently feeding several environmental crises that, over the long run, threaten to make most of us poorer, sicker and more miserable. Climate change alone could slice 20 per cent off global GDP by 2100 – a staggering number.

Clear-cutting boosts GDP not wealth

We need to broaden our vision and definition of economic success before it’s too late.

I grew up in the 1970s and 80s surrounded by the mixed hardwood forests of the northeastern United States. For me, the trees were a refuge, a place to run, discover and savor the history and mystery of the land and its people.

Those experiences with my friends were more important than the amount of money in my pocket. And they led to a realization early on in my career as an economist: that wealth is about more than just income.

This is one of GDP’s most significant oversights. 

With every forest we clear cut and every ounce of fossil fuel we burn, GDP rises. But through those actions, we are whittling away at the natural world, which supplies us with food, water, medicine, clean air and countless other essentials. 

By focusing only on GDP, we’re ignoring what’s happening to the natural assets on which our prosperity ultimately depends. It’s like we’re driving a car and only looking at the speedometer, not the energy remaining in the battery. 

That is the difference between measuring income versus measuring wealth.

The answer to this dilemma lies in looking beyond GDP. We must start considering a broader range of indicators when making policy decisions. 

From an environmental perspective, that means measuring and valuing natural assets like forests, water, soil, biodiversity and clean air. By assigning a value to nature, decision-makers can better understand the economic consequences of, say, strip-mining a mountain top or letting plastic waste overwhelm a river. 

There is still some debate over how exactly to do this kind of natural capital accounting. But that’s not a reason to dismiss it, as many have done. It took years of refinement to end up with the GDP formula we have today.

Costa Rica’s example

The idea of looking beyond GDP isn’t only a theoretical debate. Countries and communities around the world have started to make economic decisions based on their natural assets. A prime example is Costa Rica, a biodiversity hotspot where a years-long effort to conserve land and seascapes has led to a boom in tourism. That in part helped elevate the country into the club of high-income nations.

This kind of environmentally focused economic decision making can pay huge dividends. By stabilizing the climate, ending pollution and halting the loss of the natural world, humanity could save millions of lives a year and create US$20 trillion in economic benefits annually by 2070, found the Global Environment Outlook 7, a 2025 report from the United Nations Environment Programme (UNEP). The report was funded by the European Union among others.

I began my career as an economist before moving to UNEP, which focuses on solving the world’s thorniest environmental problems. During that time, I’ve come to appreciate that “wealth” means more than simply “income.” True prosperity means being able to provide for ourselves now and into the future. Anything short of that is an empty kind of affluence – and ultimately doomed to be short-lived.

As deadly heat blankets our cities, species slip into extinction and the planet struggles with rising toxicity and pollution, I am convinced that we can do better at measuring what matters. And that means updating and expanding how we measure economic progress.