Wealth versus Happiness
Economists have long used Gross Domestic Product (GDP) per capita as a proxy measure for the average level of wellbeing within a country. GDP is a measure of the goods and services produced in a country and is a fairly good proxy for material wealth. However, it fails to capture many other factors that are clearly important for wellbeing: for example, amount of leisure time, health, quality of one's environment, wealth distribution, employment rates, and changes in wealth over a lifetime. Some negative influences on wellbeing – such as crime – may even contribute positively to GDP since the costly government responses to them are included in a country's GDP. The gap between GDP and wellbeing obviously has important practical implications since policies correlated with higher (lower) GDP are likely to be adopted (rejected) for that reason.
On 14 September an expert group commissioned by French president Nicolas Sarkozy and and including no less than five Nobel prize laureates released a report recommending that official statisticians should move to a wider measure of wellbeing that takes into account some of the factors that GDP leaves out. This move away from 'GDP fetishism' has long been championed by the commission's chair, Joseph Stiglitz.
Everyone seems to acknowledge the problems with GDP, but the commission's report gets a cool response from some of the business press, with the adjective 'Orwellian' cropping up here and there. The Economist admits that 'broadening official statistics is a good idea in its own right', but emphasises that 'these are early days' and remains sceptical about the practicalities of moving away from GDP. The primary concern is about potential abuse of a less well defined measure by governments or interest groups and a resulting lack of public trust. The message seems to be that it's fine to research broader measures and to start collecting figures, but until something robust is found, GDP per capita should remain the gold standard. Policymakers shouldn't put any credence in the broader measures yet.