Joseph Stiglitz has been researching the inadequacies of using GDP as a measure of societal well-being recently, and he presents some of his early argument over at the Guardian.
The big question concerns whether GDP provides a good measure of living standards. In many cases, GDP statistics seem to suggest that the economy is doing far better than most citizens' own perceptions. Moreover, the focus on GDP creates conflicts: political leaders are told to maximise it, but citizens also demand that attention be paid to enhancing security, reducing air, water, and noise pollution, and so forth – all of which might lower GDP growth.
The fact that GDP may be a poor measure of well-being, or even of market activity, has, of course, long been recognised. But changes in society and the economy may have heightened the problems, at the same time that advances in economics and statistical techniques may have provided opportunities to improve our metrics.
Defenders of GDP don't tend to defend the measure so much as argue that its inadequacies are recognized. Bruce Bartlett, for instance, writes that "in the end, GDP simply measures what it measures and it serves its purpose reasonably well. The problems Stiglitz identifies are ultimately unfair because he is criticizing it for being something it's not and never was intended to be."
But whether GDP was supposed to be the all-powerful metric by which we measured progress or not, the fact of the matter is that it currently serves that role, or at least comes close to it. We speak about global warming entirely in terms of the impact the solutions will have on GDP, and we refer to the early years of the decade as a period of good growth even though median Americans saw virtually no increase in their wages. "This is like attacking aspirin for not curing the common cold," continues Bartlett, but if people were using aspirin under the assumption that it cured the common cold, it would be important to disabuse them of that notion.
Stiglitz, happily, is involved in a French project to come up with a successor to GDP. But there have been many of these projects in the past and many alternatives proposed. The question isn't developing these measures. It's popularizing them.
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