This passage is adapted from Jan Delhey and Christian Kroll, “A ‘Happiness Test’ for the New Measures of National Well-Being: How Much Better than GDP Are They?” ©2012 by WZB Berlin Social Science Center.
There is currently a broad global movement away from
considerations of mere economic success towards a new public
policy goal involving a broader notion of quality of life. This
movement has also spurred a rethinking of which statistics
inform us best about a country’s situation and how its citizens
are faring. For decades, the gold standard was a
macroeconomic indicator: the GDP—gross domestic product,
calculated per capita. This is the most prominent yardstick that
the media, politicians and the public consider when they try to
assess how a country is performing. However, this measure
was never meant to be a measure of the welfare of nations (as
its creator Simon Kuznets warned in the 1930s) and so there is
growing skepticism about the GDP’s usefulness as a measure
of national well-being. Slogans such as “beyond GDP” or
“redefining progress” challenge the preoccupation with the
GDP.
Three key strategies have been employed to develop a better
measure of well-being: healing the GDP, complementing the
GDP, and replacing the GDP . . . .
The first group of initiatives tries to deal with the downsides
of the GDP by attempting to fix the indicator itself. . . .
One key aim of this group of measures is to account for
sustainability and the environmental damage associated with
GDP growth. For example, the Index of Sustainable Economic
Welfare and the Genuine Progress Indicator are both based on
the consumption of private households. However, they also
reflect additional social factors such as household labor and
education with a rising value, while air pollution and
environmental damage lower the score. As a consequence, the
downsides of economic growth and modernization ought to be
accounted for whilst retaining the benefits of the GDP, namely
a single figure that captures different entities and is comparable
across nations. . . .
The second group of measures moves further away from the
GDP as a yardstick than the previous approaches but does not
abandon the sum of goods and services altogether. Instead, this
group of measures seeks to assess national well-being by
complementing the GDP with a number of key social
indicators. . . .
For example, the Human Development Index comprises the
three dimensions health, education, and material living
conditions, which are measured by life expectancy, years of
schooling, and GNI [gross national income], respectively. . . .
While the method of complementing the GDP with further
indicators is able to overcome the controversial monetization
from which the measures that try to “heal GDP” suffer, the
standardization of different units is also controversial. In
particular, merging different units into a single standardized
index is methodologically challenging and again requires value
judgements by the researcher. . . .
The most radical departure from the GDP is embodied by
the third group of measures, which seeks alternative indicators
of well-being without accounting for the sum of goods and
services produced in an economy. The logic behind this
approach is that the GDP has always been and remains a means
to an end rather than the end itself. . . .
Famous examples include the Happy Planet Index
calculated by the New Economics Foundation. The index
comprises life expectancy, life satisfaction, and the ecological
footprint and is therefore able to demonstrate how many
resources countries need in order to produce a certain level of
health and subjective well-being. . . .
Replacing the GDP altogether is quite a drastic strategy for
assessing national well-being, as not only is economic growth a
prerequisite for many of the social goods that make life
enjoyable but the metric of GDP is also highly correlated with
such other factors. Thus, by arguing that the GDP is only a
means to an end, these measures are in danger of making a
conceptual assumption that is notable in theory but can be
challenged in practice on the basis of actual causal mechanisms
and empirical data.
Data from Saamah Abdallah, Juliet Michaelson, Sagar Shah, Laura Stoll, and Nic Marks, “The Happy Planet Index: 2012 Report.” © 2012 by new economics foundation.
There is currently a broad global movement away from
considerations of mere economic success towards a new public
policy goal involving a broader notion of quality of life. This
movement has also spurred a rethinking of which statistics
inform us best about a country’s situation and how its citizens
are faring. For decades, the gold standard was a
macroeconomic indicator: the GDP—gross domestic product,
calculated per capita. This is the most prominent yardstick that
the media, politicians and the public consider when they try to
assess how a country is performing. However, this measure
was never meant to be a measure of the welfare of nations (as
its creator Simon Kuznets warned in the 1930s) and so there is
growing skepticism about the GDP’s usefulness as a measure
of national well-being. Slogans such as “beyond GDP” or
“redefining progress” challenge the preoccupation with the
GDP.
Three key strategies have been employed to develop a better
measure of well-being: healing the GDP, complementing the
GDP, and replacing the GDP . . . .
The first group of initiatives tries to deal with the downsides
of the GDP by attempting to fix the indicator itself. . . .
One key aim of this group of measures is to account for
sustainability and the environmental damage associated with
GDP growth. For example, the Index of Sustainable Economic
Welfare and the Genuine Progress Indicator are both based on
the consumption of private households. However, they also
reflect additional social factors such as household labor and
education with a rising value, while air pollution and
environmental damage lower the score. As a consequence, the
downsides of economic growth and modernization ought to be
accounted for whilst retaining the benefits of the GDP, namely
a single figure that captures different entities and is comparable
across nations. . . .
The second group of measures moves further away from the
GDP as a yardstick than the previous approaches but does not
abandon the sum of goods and services altogether. Instead, this
group of measures seeks to assess national well-being by
complementing the GDP with a number of key social
indicators. . . .
For example, the Human Development Index comprises the
three dimensions health, education, and material living
conditions, which are measured by life expectancy, years of
schooling, and GNI [gross national income], respectively. . . .
While the method of complementing the GDP with further
indicators is able to overcome the controversial monetization
from which the measures that try to “heal GDP” suffer, the
standardization of different units is also controversial. In
particular, merging different units into a single standardized
index is methodologically challenging and again requires value
judgements by the researcher. . . .
The most radical departure from the GDP is embodied by
the third group of measures, which seeks alternative indicators
of well-being without accounting for the sum of goods and
services produced in an economy. The logic behind this
approach is that the GDP has always been and remains a means
to an end rather than the end itself. . . .
Famous examples include the Happy Planet Index
calculated by the New Economics Foundation. The index
comprises life expectancy, life satisfaction, and the ecological
footprint and is therefore able to demonstrate how many
resources countries need in order to produce a certain level of
health and subjective well-being. . . .
Replacing the GDP altogether is quite a drastic strategy for
assessing national well-being, as not only is economic growth a
prerequisite for many of the social goods that make life
enjoyable but the metric of GDP is also highly correlated with
such other factors. Thus, by arguing that the GDP is only a
means to an end, these measures are in danger of making a
conceptual assumption that is notable in theory but can be
challenged in practice on the basis of actual causal mechanisms
and empirical data.
Data from Saamah Abdallah, Juliet Michaelson, Sagar Shah, Laura Stoll, and Nic Marks, “The Happy Planet Index: 2012 Report.” © 2012 by new economics foundation.