by Jerome a Paris
Wed Sep 20th, 2006 at 08:54:54 AM EST
Take a look at this fascinating note from the research team of Deutsche Bank, the well known hippies: Measures of well-being - There is more to it than GDP (pdf, 10 pages)
GDP only measures the market value of all final goods and services produced within a country in a given period. It is the most widely followed metric for assessing an economy’s performance. However, GDP includes many items that do not help well-being: depreciation, income going to foreigners, and regrettables like security expenditure.
Economic well-being is a broader concept, but still restricted to material aspects. It is influenced by parts of GDP, by non-market activity, leisure and wealth. Unemployment and income inequality tend to reduce economic well-being. The Centre for the Study of Living Standards sees the highest economic well-being in Norway, France and Belgium.
Individual living conditions also include non-material aspects such as health, life expectancy, education and the state of the environment. The Weighted Index of Social Progress sees Sweden, Denmark and Norway on top, while the Happy Planet Index sees Colombia and Costa Rica among the leaders.
Happiness, as the ultimate goal, requires the most encompassing measure. This happiness depends primarily on family, friends, work satisfaction and activities. Income does not play a major role.
The note is a quick and easy read, and an excellent introduction to the whole topic of alternative ways to measure things, and I can only encourage you to read it all.
I've focused the title of the story on one concept which I find quite enlightening and which might be the easiest to measure: that of "regrettables":
GDP includes many items that do not boost human wellbeing. If a hurricane or an earthquake destroys an entire region, the reconstruction effort is counted as a boost to GDP – even if it only replaces something that was there not long before. Likewise, expenditure
on crime prevention and security adds significantly to GDP in many countries – but only restores a safe environment. Medical expenditure as a result of air and noise pollution also adds to GDP as do diet classes, antidepressants and a sizeable list of other
items. However, taken to the extreme this line of reasoning would imply that basic food and clothing also should not be included. This again highlights some of the arbitrariness of the different measures.
The question could be: how much of our activity is fighting entropy, and how much of that can be counted as worthwhile? Or, to open up the wider debate: how much do we need to run to stay in the same place, and how much of that "speed" can be counted as performance?