In 1934, one of the original developers of the Gross National Product economic indicator (GDP) cautioned that “the welfare of a nation can scarcely be inferred from a measurement of national income.” Deeply flawed though it is, GDP became our primary way to measure the wealth, and health, of nations. But this week, for the first time in seventy years, we may be moving towards using a more accurate barometer.
The leader of a major developed country, President Nicolas Sarkozy of France, has announced that he intends to begin a ‘great revolution’ in the way we measure social progress. The announcement came after a year and a half of research by a commission set up by the President to reconsider the way progress is measured. The commission was chaired by former chief economist at the World Bank, Joseph Stiglitz, and its star-studded cast included development guru Amartya Sen, Nobel-prize winning psychologist Daniel Kahneman, and economist-turned-climate-change-hero Lord Nicholas Stern.
The commission’s final report, which has been fully endorsed by President Sarkozy, recognizes that “new political narratives are necessary to identify where our societies should go” and boldly advocates for “a shift of emphasis from a ‘production-oriented’ measurement system to one focused on the well-being of current and future generations.” Their conclusions echo what many normal people feel—in the UK, where I live, a 2006 poll found that 81 percent of people believed that the government's primary objective should be the "greatest happiness" of its citizens, rather than the "'greatest wealth."
The main problem with using GDP as a primary economic indicator is that, ultimately, it is simply the sum of all transactions in a country. It values guns and prisons in the same way it values music and medicine: by how much money changes hands. When the Exxon Valdez spilt its oil on the shores of Alaska in 1989 it increased U.S. GDP by $2 billion, thanks to the costs of the clean-up operation. But when a free concert is put on in a town square, or a parent participates on a school board, or a volunteer helps a charity, the change to the balance sheet is a big zero.
http://www.yesmagazine.org/new-economy/the-economics-of-happiness
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