Changing my mind about GDP alternatives
I now think switching to a measure of well-being that includes some objective and subjective measures of happiness is probably a good thing on balance.
France commissioned a nobel-rich group to look at it. The report offers three broad categories of problems with GDP that an alternative measure might address:
Classical GDP Issues - issues with GDP everybody agrees on like pricing an individual’s use of government provided healthcare or households engaged in child care. Or more wonkish problems like accurately capturing capital depreciation.
Quality of life - things that affect our life broadly not captured in production. Key among these are leisure, consumption, crime and health. More controversially, the report would include subjective measures of wellbeing like so called “ladder of life” scores.
Sustainability - if we’re going to take a hit now for future environmental preservation then it would be best if we had a measure that captured that
GDP is pretty precise, captures a lot of what we think of as well-being and has been collected for a while, but it seems like we should probably fix the “classical” problems at the very least.
I’m inclined to think the sustainability section would be immensely important as well. If we have pride in our GDP, good environmental policy is going to be difficult. And don’t think the warm fuzzies we get from stupid things like GDP numbers don’t matter; two examples:
First, at least in one experiment, putting a smiley face on people’s energy bills when they had below average consumption had a significant effect on their consumption patterns. Second, in oldschool Sim City, the game would play a cheering sound when you reduced taxes and a booo sound when you increased them. But that was based just on the change, not the absolute value, so if I wanted to soak up my citizens’ wealth, I’d increase taxes to 20% and then drop them to 19% just to end on that positive note. Silly, but I bet I’m not the only one.
Subjective measures like “ladder of life” are rightly a bit more controversial in my view. It’s tough to say exactly what they measure. Some people think Bhutan is nuts; the Economist is mixed. I’d probably go with a measure that didn’t include them just to avoid controversy.
