Computation of an ISEW usually starts from the value of
personal consumption expenditures which is a sub-component of
GDP since GDP = Personal consumption + Public consumption +
Investment + (Exports – Imports). Consumption expenditures are
weighted with an index of “distributional inequality” of income
(usually a modified Gini Coefficient). Then, certain welfare relevant
contributions are added and certain welfare relevant losses are
subtracted. As an example take the U.S.-study of Cobb and Cobb
(1994): After having weighted personal consumption expenditures
by a modified Gini Coefficient of pre-tax income distribution data,
they add the estimates of the value of the services from household
labour, consumer durables and streets and highways. They also add
net private investment into man-made capital and changes in the net
international investment position of the U.S.4 They subtract most
expenditures on health and education because these are regarded
as mostly defensive expenditures. They also subtract expenditures
on consumer durables, estimates of the costs of commuting, car
accidents, and the costs of environmental degradation such as
water, air and noise pollution, loss of wetlands and farmlands, the
depletion of nonrenewable resources and long term environmental
damage due to CO2-emissions. The ISEW is simply the sum of the
weighted personal consumption expenditures and all the mentioned
corrections.