Ever since science and fossil fuels combined to ignite the industrial revolution, societal progress has been measured by one thing: gross domestic product (GDP) growth. 

And for good reason. In those early days, almost all people experienced serious material lack. The ability to produce more goods and services genuinely improved billions of lives. 

For the large portion of the population not lucky enough to be born into affluence, this is still the case today. Further growth can avoid a tremendous amount of global suffering. 

But GDP growth is no longer universally good. Here’s why…

Limits to growth

In the early days of the industrial revolution, natural resources were essentially limitless and the planet could easily absorb our pollution. 

Not any more. Today, we’re faced with a wide array of environmental problems caused by too much resource extraction and waste production. See the earlier post on this topic. 

Climate change offers the best example. It’s a great global threat, but luckily, we have several tools for warding off the worst effects. These tools can be identified very elegantly as illustrated below. 

The Kaya identity

Here it is in all its glory:

Don’t be intimidated by the equation 🙂 It really is very simple. 

Our global emissions obviously depend on how many people there are on the planet. But the Kaya identity shows us there are three other ratios that influence emissions:

1. How much goods and services each of those people consume (GDP/person).
2. The energy required to generate those goods and services (Energy/GDP).
3. The emissions intensity of the energy (Emissions/Energy). 

To date, the first ratio in this list was the key indicator of human progress. The more goods and services each person can consume, the better. 

Hence, GDP/person must always increase, while the global population also continues increasing. Thus, if we want to reduce our environmental impact, we need big reductions in the second and third ratios. 

We can reduce the second ratio by using energy more efficiently. More efficient cars, better home insulation, and a preference for buying services rather than material goods all help. 

The third ratio can be reduced by using cleaner energy sources such as renewable energy, nuclear, and CO2 capture. 

But there is another lever – the one that this blog is all about:

Life efficiency

In reality, we don’t want more goods and services, we want the happiness and longevity we believe those goods and services can give us.

This is best expressed as something called “happy life years” – a combination of a subjective wellbeing score and life expectancy. 

Incorporating happy life years (HLY) into the Kaya identity looks like this:

This is the same as the original Kaya identity, aside from splitting the first ratio (GDP/Person) discussed above into two parts:

1. The number of happy life years enjoyed by the average person (HLY/Person).
2. How much goods and services are required for building a long and happy life (GDP/HLY). 

In this case, we clearly extract the thing we must keep increasing at any cost: HLY/Person. 

However, the ratio of GDP/HLY now gives us a lovely additional lever we can pull to reduce our environmental impact. And this ratio is nothing more than the inverse of that precious intangible asset called life efficiency. 

Global implications of higher life efficiency

Reducing the GDP/HLY ratio requires nothing more than a mindset shift. On the contrary, the other two ratios (Energy/GDP and Emissions/Energy) require lots of new technology to be developed and deployed. 

And the degree to which it can be reduced is just incredible. My current life efficiency is about 4x higher than the developed world average. Sure, this is an extreme case, but even just a 2x improvement can have a tremendously positive influence on the world.

Tomorrow, we’ll dissect this potential in more detail.