Comment: Development – Time to leave GDP behind
Gross domestic product is a misleading measure of national success. Countries should act now to embrace new metrics…
Robert Costanza, Ida Kubiszewski, Enrico Giovannini, Hunter Lovins, Jacqueline McGlade, Kate E. Pickett, Kristín Vala Ragnarsdóttir, Debra Roberts, Roberto De Vogli& Richard Wilkinson
http://www.nature.com/news/development-time-to-leave-gdp-behind-1.14499
Nature, 15 January 2014
Excerpt
Robert F. Kennedy once said that a country’s gross domestic product (GDP) measures “everything except that which makes life worthwhile”. The metric was developed in the 1930s and 1940s amid the upheaval of the Great Depression and global war. Even before the United Nations began requiring countries to collect data to report national GDP, Simon Kuznets, the metric’s chief architect, had warned against equating its growth with well-being.
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 country1.
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 quantitatively3, 4. 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 (see Supplementary Information). 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 pollution6.
Crucially, unlike other measures in the first group, GPI considers income distribution. A dollar’s worth of increased income to a poor person boosts welfare more than a dollar’s 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 health5…
…Subjective measures of well-being. The most comprehensive of these is the World Values Survey (WVS), which covers about 70 countries and includes questions about how satisfied people are with their lives. Starting in 1981, the WVS is conducted in ‘waves’, the sixth of which is currently in progress. Another example is the gross national happiness index used in Bhutan. This measure uses elaborate surveys that ask how content people feel in nine domains: psychological well-being, standard of living, governance, health, education, community vitality, cultural diversity, time use and ecological diversity.
Subjective well-being has been highly studied, and has even been recommended as the most appropriate measure of societal progress7. But subjective indicators are tricky to compare across societies and cultures. For example, self-reported health tracks with clinically reported rates of morbidity and mortality within countries but not across them8. And people are not always aware of the things that contribute to their well-being. Few of us give credit to ecosystem services for water supply and storm protection, for example.
Weighted composite measures of several indicators. A comprehensive picture of sustainable societal well-being should integrate subjective and objective indicators9(see Supplementary Information, Figure S1), as these measures begin to do. One example is the Happy Planet Index, introduced by the New Economics Foundation in 2006. This multiplies life satisfaction by life expectancy and divides the product by a measure of ecological impact.
Other indices in the third group combine a range of variables, such as income, housing, jobs, health, civic engagement, safety and life satisfaction. The Better Life Index, developed by the Organisation for Economic Co-operation and Development, maintains a website that allows users to choose how to weight variables, revealing how the emphasis on different variables can influence countries’ rankings…
…If undertaken with sufficiently broad participation, the hunt for the successor to GDP might be completed by 2015. There are significant barriers to doing this, including bureaucratic inertia and the tendency of governments, academia and other groups to work in isolation. These barriers can be overcome with dedicated leadership. Crucially, people can now communicate across the globe with an ease unthinkable in the days of Bretton Woods.
Any ‘top-down’ process must be supplemented with a ‘bottom-up’ engagement of civil society that includes city and regional governments, non-governmental organizations, business and other parties. We recently formed the Alliance for Sustainability and Prosperity (www.asap4all.com) to do just that. This web-based ‘network of networks’ can communicate research about sustainable quality of life and the elements that contribute to it (see Supplementary Information), and so help to build consensus among the thousands of groups now concerned with these issues.
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.
http://www.nature.com/news/development-time-to-leave-gdp-behind-1.14499
