Lesson Objective: Students will be introduced to "indicators" as a measure of community wealth. They will be able to explain some traditional measures of wealth and what the strengths and weaknesses of the traditional measures are. Students will understand what indicators are and why indicators are a valuable tool in analyzing the wealth of a community.

Explain to the students that this lesson unit will allow them to explore measurements of the wealth of the region where they live. They will have the opportunity to look in-depth at one aspect of the wealth of their region. They will understand the role that the various levels of government play in their community and the importance of individual participation in the democratic process.

They will begin by exploring traditional methods of measuring the wealth and prosperity of a region.

A Webster's dictionary definition of wealth describes "all property that has a money value or an exchangeable value; all material objects that have economic utility." Many people would argue, however, that wealth comes in many forms and is more inclusive than simply property that can be exchanged for other goods. Wealth may include such things as health, safe communities, quality of life, security, and knowledge.

Macroeconomics is a sub-discipline of economics that analyzes the aggregate performance of an economy. The data that go into macroeconomic analysis come from a method developed during the first half of the twentieth century called "national income accounting." National income accounting is the traditional method used to judge the wealth and prosperity of a nation. The Gross Domestic Product (GDP) and the unemployment rate are two important factors measured in traditional economic accounting.

GDP is the market value of all final goods and services produced in a nation during a given period of time.

Show a transparency made from Overhead Transparency Master 1, "Gross Domestic Product."

A continually growing per-capita GDP, adjusted forinflation, is seen as a sign of prosperity in traditional economic analysis.

The number of unemployed people is the number of adults without jobs that are seeking work. The labor force is the total number of employed and unemployed adults.

Show a transparency made from Overhead Transparency Master 2, "Unemployment Rate." The unemployment rate is calculated by dividing the number of unemployed people by the labor force and multiplying the result by 100.

A low unemployment rate is seen as another sign of prosperity in traditional economic analysis, because it means that the economy is at near full production and most people have jobs.

Macroeconomics simply tallies up the value of market transactions, yet macroeconomic performance defines the issues that policy makers work to address. If traditional macroeconomics does not tell the whole story, then policy makers are working off of flawed or incomplete data.

Examples of some limitations:

• Money spent deterring and remediating crime and other problems associated with the deterioration of communities is counted as economic gain and increases in GDP, as is money spent after a natural disaster.
• Money spent remediating pollution problems is added to the income generated by the industrial process that originally created the pollution problem, thus creating the illusion that the industrial activity creates a double benefit to society.
• GDP is not affected by the degree of inequality in the distribution of income in a national economy.
• GDP does not take into account moral, spiritual, or aesthetic values associated with biodiversity, wilderness, Native American religious sites, or unique aspects of the natural environment.
• GDP does not distinguish between a dollar generated by sustainable harvest of a resource from a dollar generated in the process of exhausting a natural resource.

Simple GDP accounting treats every transaction as positive, as long as money changes hands. Besides the above mentioned limitations, GDP does not take into account valuable services provided for free. For example:

• GDP does not take into account "women's work" -- child rearing, cooking, cleaning, family support, etc.
• GDP does not take into account the value of volunteer work.

Without these services, our societies would collapse, yet since they are provided for "free" they are not accounted for in traditional accounting systems.

The unemployment rate also has limitations in assessing the progress or wealth of a nation. The unemployment rate does not consider those that are "underemployed." Underemployed people are those that are working, but for less hours or at a lower wage than they actually need to support themselves and a family. The underemployed also includes those people working at a lower skill level than they are trained for. Additionally, the unemployment rate does not include "discouraged workers" — those people that are not employed, but are no longer actively seeking employment.

There are several alternatives to national income accounting being proposed. Alternative systems include the Green GDP, the Index of Sustainable Economic Welfare (ISEW) and the Genuine Progress Indicator (GPI). All of these alternatives include measures of the health of the environment and the existence of community.

Friends of the Earth web site: http://www.foe.co.uk/campaigns/sustainable_development/progress/index.html

Additional Resources on the GPI: Cobb, C., T. Halstead and J. Rowe. 1995. The Genuine Progress Indicator: Summary of Data and Methodology. San Francisco: Redefining Progress.; Redefining Progress web site: http://www.rprogress.org

On a regional basis, there are methods to measure the wealth and prosperity of a community beyond the traditional methods. One way is through the use of indicators.

Communities are made up of three main components -- the people, the economy, and the environment. Any system designed to measure the true wealth of a community must take into account all three of these strands. Within each of the strands, there are indicators that can be analyzed to help us understand how our region is doing. Knowing how we are doing in all three of the categories of wealth better prepares us to begin planning for the future.

The people, economy, and environment of a community are interlinked. Overhead Transparency 5, "Resource Dependent Employment" clearly illustrates this relationship. People in our region clearly rely on extracting some of the area's natural resources for employment. Yet intact natural resource stocks provide nearly as many jobs through tourism. Many people working in the extractive industries are highly skilled and well-paid and do not want to jeopardize their family's stability. Overharvest of timber may cause timber jobs to increase, but cause a subsequent decline in the tourism and fishing industries. A balance of the people, economy and environment components of our community must be sought.

Students will be asked to consider the linkages between the components of community wealth and how to balance the components throughout this lesson unit.

Students have discussed traditional economic measures and some of the limitations of them. Students have been introduced to the three components of community wealth and the indicators used to measure wealth.

Students are now ready to consider in-depth an indicator of wealth in the Humboldt County region.