Time to leave GDP behind! “GDP is dangerously inadequate as a measure of quality of life.” Gross domestic product is a misleading measure of national success. Countries should act now to embrace new metrics, urge Robert Costanza and colleagues. GDP measures mainly market transactions. It ignores social costs, environmental impacts and income inequality. If a business used GDP-style accounting, it would aim to maximize gross revenue — even at the expense of profitability, efficiency, sustainability or flexibility. That is hardly smart or sustainable (think Enron). Yet since the end of the Second World War, promoting GDP growth has remained the primary national policy goal in almost every country. Meanwhile, researchers have become much better at measuring what actually does make life worthwhile. The environmental and social effects of GDP growth can be estimated, as can the effects of income inequality2. The psychology of human well-being can now be surveyed comprehensively and quantitatively. A plethora of experiments has produced alternative measures of progress (see Supplementary Information). The chance to dethrone GDP is now in sight. By 2015, the UN is scheduled to announce the Sustainable Development Goals, a set of international objectives to improve global well-being. Developing integrated measures of progress attached to these goals offers the global community the opportunity to define what sustainable well-being means, how to measure it and how to achieve it. Missing this opportunity would condone growing inequality and the continued destruction of the natural capital on which all life on the planet depends. Alternative measures of progress can be divided into three broad groups: - those in the first group adjust economic measures to reflect social and environmental factors - The second group consists of subjective measures of well-being drawn from surveys - The third group relies on weighted composite indicators of well-being including housing, life expectancy, leisure time and democratic engagement. Adjusted economic measures. These are expressed in monetary units, making them more readily comparable to GDP. Such indices consider annual income, net savings and wealth. Environmental costs and benefits (such as destroying wetlands or replenishing water resources) can also be factored in. One example is the genuine progress indicator (GPI). This metric is calculated by starting with personal consumption expenditures, a measure of all spending by individuals and a major component of GDP, and making more than 20 additions and subtractions to account for factors such as the value of volunteer work and the costs of divorce, crime and pollution. Crucially, unlike other measures in the first group, GPI considers income distribution. A dollars worth of increased income to a poor person boosts welfare more than a dollars worth of increased income does for a rich person. And a big gap between the richest and the poorest in a country — as in the United States and, increasingly, in China and India — correlates with social problems, including higher rates of drug abuse, incarceration and mistrust, and poorer physical and mental health. The successor to GDP should be a new set of metrics that integrates current knowledge of how ecology, economics, psychology and sociology collectively contribute to establishing and measuring sustainable well-being. The new metrics must garner broad support from stakeholders in the coming conclaves. It is often said that what you measure is what you get. Building the future we desire requires that we measure what we want, remembering that it is better to be approximately right than precisely wrong.
Posted on: Sun, 19 Jan 2014 20:23:39 +0000
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