See the following diaries:

On (moving beyond) GDP:

Beyond GDP - Day 2 (afternoon) Summary
Minor Errors
Anyone attending "Beyond GDP"?
Measuring Progress (pt. 1)
Happiness and Economics
Regrettables
Socratic Economics I: Why GDP growth above all else?
Let's Ban the GDP

On lying with statistics:

How To Lie With Numbers 2 - Laffer Nonsense From The WSJ
How To Lie With Numbers 1½
How To Lie With Numbers - a short guide to politics and other things
Soundbite Statistics: the Unemployment Rate (1) (with further links)
Lies, Damn Lies and Fertility Statistics
How to lie with statistics, or Spin 401

The FT highlights the flaws of GDP:

FT.com / Comment / Analysis - A measure remodelled

But GDP is a quantitative measure, not a qualitative one. It takes no account of the distribution of income and includes no moral judgments about the worth of the activity performed (other than excluding illegal activities such as the trade in illicit drugs). So, for example, government spending on prisons counts the same as government spending on universities. Cleaning up a nuclear accident would add to GDP in the same way as the production of solar power. When oil is extracted from the ground and sold to consumers, this is counted as an addition to a nation's wealth rather than a depletion of its resources.

In testimony last year to the US Senate, Jonathan Rowe, a Californian writer, highlighted some of the absurdities of mechanically measuring the economy by counting how much it produces. Measuring healthcare by inputs rather than outputs - the sale of medical services and drugs rather than the number of (healthy) people - can lead to particularly perverse perspectives. In this view, the economic "hero" of GDP statistics would be a terminally ill cancer patient going through expensive medication and a costly divorce.

"Next we will hear about the `disease-led recovery'," Mr Rowe scoffed. "To stimulate the economy we will have to encourage people to be sick so that the economy can be well."

The FT mentions the works of the Commission on the Measurement of Economic Performance and Social Progress set up by the French government:

But wait: a 24-member commission of prominent economists led by Joseph Stiglitz and Amartya Sen, both Nobel prize winners, is due to report in April on ways of improving our economic bookkeeping. The aim is to render economic data more comprehensive, more intelligible to the public and more relevant for policymakers by taking into account such factors as environmental degradation and quality of life.

In changing the way we calculate economic activity, some commission members hope, we might also be able to change our political priorities and build happier, greener societies.
...
Mr Stiglitz, a professor at New York's Columbia University, says that as an indicator of the market value of all goods and services produced in an economy, GDP has always been a flawed measure of economic performance, let alone social progress. He argues that the current global economic turmoil has made its deficiencies even more glaring. "This crisis has shown that the GDP numbers for the US were totally erroneous. Growth was based on a mirage," he says.

Here are some links to the Commission's Working Papers and Reports

Proponents of the GDP often claim that it's simple and it would be difficult to design indicators which could be understood by laymen. Amartya Sen debunks this argument:

FT.com / Comment / Analysis - A measure remodelled

Mr Sen, professor of economics at Harvard University, says people are perfectly capable of getting to grips with more than one economic number and would probably welcome different perspectives. "Indicators are ways of generating public discussion," he says. "Once they are out there I hope there will be a lot of focus on these indicators and that will affect policy."

Jean-Philippe Cotis, the head of Insee, France's statistics agency, and a commission member, says the big task is to try to narrow the gaps between objective measures of economic production and subjective perceptions of well-being.
...
Mr Cotis suggests that one of the most practical services statisticians can perform is to examine the components of GDP in more detail, to gain a clearer picture of what is happening. Insee has been studying the budgets of French families between 2001 and 2006, distinguishing between their fixed costs - such as housing, taxes and utility bills - and discretionary spending. "Basically, the `free cash flow' of the lowest quintile was 45 per cent of income in 2001 - but five years later it was down to 25 per cent, mostly because of an increase in housing costs," Mr Cotis says.
...
Similar subjective judgments come in when trying to assess the quality of life. The United Nations has developed its own Human Development Index, which attempts to measure social factors such as mortality rates, literacy and standards of living. Mr Sen, who was instrumental in developing the HDI, has long stressed the importance of educational opportunity and social justice in formulating economic policy.
...
But Mr Sen insists that economists and psychologists should try harder to understand what people think and how they act in real life, rather than just imputing rational motivations to them. "Economists usually focus on the rationality of market behaviour. We think that economic actors are strong, silent, rational men and you can sneak up on them and see what their preferences are. Instead, we are going to ask them questions," he says.