Modeling Economics and Sustainability: GDP as a Goal vs GDP as a Driver

Abstract

In this paper, we are talking about the role of GDP as a goal vs driver in the four tools that are used to assess national policy impacts in developing countries. It consists of a benchmarking that concerns the Dynamic Stochastic General equilibrium (DGSE) model of the International Monetary Fund, the Long-Term Growth Model (LTGM) of the World Bank, the Stock-Flow Consistent Prototype Growth Model of Agence Française de Development, and the integrated Sustainable Development Goals (iSDG) of the Millennium Institute. The benchmarking considers four criteria of benchmarking which are important to describe the behavior of sector development such as feedback loop mechanisms (cause and effect relationships), the nature of elements that compose them (stock and flow variables consideration), the ability of the models to elaborate a lot of synergistic policies (prospection model), and to measure SDGs performances. View to the fast-changing socio-economic and environmental conditions, development planning becomes much more difficult for policymakers and governments. These models serve as a compass to guide policymakers in their choices of public policy implementation to improve populations living conditions and make progress toward long-term development for their countries. For this reason, we analyze the place of GDP in each model, and the structure of each to consider the main important sectors of development in the environmental, social, and economic domains, and further measure the progression of the 17 SDGs for countries. The results of the analysis show that only the iSDG model meets all four requirements that we defined. Although the Stock-Flow Consistent Prototype Growth Model uses a feedback mechanism like the iSDG its structure is limited to an accounting analysis between economic agents. The two remaining models that are maximizing GDP with a Cobb-Douglas production function (GDP as a goal) models do not consider social and environmental sustainability meaning the adverse impacts of human activities and actions on social well-being and environmental quality.