Modelling the Index of Sustainable Economic Welfare (ISEW) and its response to policies
Luzie Dallinger, Reo Van Eynde, Jefim Vogel, Lorenzo Di Domenico, Se\'an Fearon, Tina Beigi, C\'edric Crofils, Kevin J. Dillman, Daniel W. O'Neill

TL;DR
This paper integrates the ISEW into a macroeconomic model to simulate its response to policies, highlighting its advantages over GDP and the Doughnut for sustainable welfare assessment.
Contribution
It introduces a dynamic macroeconomic model incorporating ISEW, analyzing policy impacts and comparing it with GDP and the Doughnut for sustainability evaluation.
Findings
All policies increase ISEW, with combined policies yielding the strongest growth.
Working-time reduction decreases ISEW, unlike other policies.
ISEW outperforms GDP in capturing policy effects but misses some environmental costs.
Abstract
Given the challenge of achieving societal welfare in an environmentally sustainable way, the Index of Sustainable Economic Welfare (ISEW) has emerged as an alternative indicator of progress in response to critiques of Gross Domestic Product (GDP). The ISEW compares the benefits of economic activity with its social and environmental costs. So far, most studies empirically analyse the ISEW for past developments, while no studies have simulated the ISEW using a dynamic macroeconomic model. We address this important gap by incorporating the ISEW into COMPASS, an ecological macroeconomic model that features the Doughnut of biophysical boundaries and social thresholds. First, we analyse how the ISEW is affected by three social and environmental policies: a carbon tax, income redistribution, and working-time reduction. We find that the ISEW grows in all scenarios. The strongest improvement…
Peer Reviews
No public reviews on file for this paper yet. If you reviewed it on a platform where reviews are public (OpenReview, ICLR, NeurIPS, ICML), you can paste yours below so the community can read it here.
Videos
No videos yet. Explain this paper in a talk, walkthrough, or lecture? Add one.
