How should we measure progress?

Gross Domestic Product (GDP) gets an enormous amount of attention and, in particular, is a focus of national policy. For instance, central bank policy is driven by trends in GDP, the Trans Pacific Partnership is advocated based on its supposed benefits to GDP, etc.

But, why do we care about it? Does it really relate to human well-being? What about a measures that include literacy, poverty, health?

Critiques of GDP:

“The welfare of a nation can scarcely be inferred from a measurement of national income.”
Simon Kuznets, 1934 one of the principle founders of the GDP.
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“Too much and for too long,we seem to have surrendered personal excellence and community value in the mere accumulation of material things. Our Gross National Product…… counts air pollution and cigarette advertising and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwoods and the loss of our natural wonder in chaotic sprawl.It counts napalm and it counts nuclear warheads, and armored cars for the police to fight riots in our cities.
Yet the Gross National Product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.”

 

Robert F. Kennedy, 1968

 

Alternatives to GDP

NY Times forum on the topic: Should we target happiness instead of GDP growth?

But we should really be thinking about the world in many dimensions. Better to focus on the components of these measures than any single aggregate.

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