Another Lost Decade? ... 'Advanced' Economic Growth Without Sustainability, Equitability, Or Happiness?

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"Mr [Joseph] Stiglitz, a professor at New York’s Columbia University [and a Nobel Prize laureate], 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.

“Many people looked at US GDP growth in the 2000s and said: ‘How fast you are growing – we must imitate you.’ But it was not sustainable or equitable growth. Even before the crash, most people were worse off than they were in 2000. It was a decade of decline for most Americans.”

Over the past year, the Stiglitz-Sen commission has been reviewing a vast array of alternative economic indicators while debating three main issues: how to improve standard GDP; how to incorporate new measures of economic, social, and environmental sustainability into the data; and how to devise fresh indicators for assessing quality of life. The commission may not invent a single measure to replace GDP but it could suggest a “dashboard” of indicators aiming to stimulate broader debate about the use – and abuse – of economic statistics." ...

Over the past 20 years, economists have devoted time and effort to inventing ways of measuring environmental degradation and economic sustainability. It is far easier to calculate such measures when resources, such as oil, have a market value; it is a lot trickier when common goods, such as air and water, are regarded as free. To what extent should GDP take account of some of the “bads” produced by indiscriminate economic growth, such as pollution? What value should be ascribed to other factors such as noise levels, the availability of space or the attractiveness of the landscape?

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. …

Perhaps the most controversial issue the commission is examining is whether to create some kind of “happiness index” based on surveys of people’s attitudes." ...

John Thornhill "A measure remodelled" Financial Times January 27, 2009

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Image and photo credits: IMF, Washington, D.C.; Condominiums in Pascagoula, Mississippi after Hurricane Katrina. MKieper via Wikipedia Commons. With thanks.