Beyond GDP: Measuring Our Well-Being
January 1, 2010
Happy New Year! I hope that your holidays were good and allowed time for relaxation. In my conversations with others, 2009 seemed to flit by, and many people are looking forward to what the new decade has in store—particularly in the way of economic recovery.
This brings me to an interesting article I ran across in The Economist regarding GDP and alternative methods that capture what people do live by. Just how well off are we? The article notes that the U.S. GDP per person is higher than France’s, but quickly points out that the French spend less time at work than Americans do. GDP does not capture many ingredients that determine how well-off people feel, because it primarily measures market production: values of goods and services. The problem here is that GDP is often treated as if it were a measure of economic well-being. GDP does not necessarily consider other factors, such as health, education, personal activities, social connections and relationships, environment and political voice. All of these dimensions construct people’s well-being, although many of these components are missed by conventional income metrics.
In the past few years, economists have explored other measures of well-being. In 2008, French president Nicolas Sarkozy appointed a 25-member commission, comprised of economists and social scientists, to look at these other measures. The commission isolated its work into three parts: familiar criticisms of GDP as a measure of well-being, quality of life and the well-being of future generations by distinguishing between current well-being and sustainability.
If you are interested in some “light” reading, you can download the commission’s report, titled “Report by the Commission on the Measurement of Economic Performance and Social Progress.”
What components do you use when measuring your quality of life? Do you look beyond rising incomes and greater purchasing power, and consider health, recreational time or other factors, such as vacationing, pursuing hobbies or other interests, short work commutes, etc? What actions do you perform that give future generations a healthy and sustainable living environment or human capital? As we embark into our new decade, we must consider what economic recovery means in a much broader sense than just simple GDP, or, we must question the politicians who are telling us how happy we are.
Sign up for our chapter’s Jan. 26 event: “Practical Financial Accounting & Auditing Update” with Dan Markovitz at Steamers in Pismo Beach. This will likely be our last event until June, so we’d love to have you there!