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I agree with the postulation of the author taking GDP for what it is – a measurement of transactions with no regard of their characteristics. To judge over the welfare of a country, one needs assign an “socio/eco-weight” to different transaction-types. Hence spendings on tabacco and alcohol would count less or even negatively and investments in renewable energy would count more due to a heigher weight, and so forth!
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I find intriguing that natural capital is often discussed as a counterweight to purely economic concerns with no explicit accounting for human welfare/ community well-being. I am guessing that those who live where social inequities are more visible or who are themselves disproportionately impacted by environmental degradation or market excesses are more likely to factor people’s lived reality into measures of a healthy economy. If you think I’m off base, do let me know.
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Judy,
You make a very good point. Social capital, including things like safety and security, personal freedom, and equity, is an important factor in measuring the health of an economy, and the wellbeing of a country. I refer again to the Legatum Prosperity Index (prosperity.com), where this things are incorporated. The trouble with social capital, and indeed natural and human capital, is that it is hard to quantify. Not having a monetary value does not mean it should be counted as zero, and this is key. Thank you!
Raffaele,
Thank you for your thoughtful response. There has been several attempts to make a universal indicator that is weighted for social, natural, and human capital. They do indeed treat expenditure on education as a positive investment in human capital, while pollution, extraction of natural resources and other obvious negative actions are subtracted from the growth indicator, rather than adding to it. The World Bank’s Adjusted Net Savings , might create a solid foundation for such a measurement, and the Legatum Institute (http://prosperity.com/) has done exciting work on prosperity indicators.
Really well said, Mr. Kontny. I really hope countries such as the United States will start taking ideas like this into consideration before it’s too late.
Reply Thank you Elizabeth!
From experience, I know that there is a lot of exciting things going on at the local level in the US, which gives me hope. And you, being a recent graduate from the University of Minnesota, will play an important role in this movement and force a reconsideration of the economic goals governments and business strive for today.
Well said Carl!
I would add 2 measures: “general happiness” and “general health” of a country. It’s difficult to measure, but I would suggest 2 things: the amount per capita (or % of GDP) spent on leisure activities. And the percentage of population using preventive health services. And then the % per capita of the part of total healthcare expenditures used for preventive services.
Thank you, Bernard!
I like the suggestions you make, health and happiness is what all the alternative measurements to GDP seem to focus on, along with degradation of natural resources and ecosystems. How would you integrate “general health” and “general happiness” in a single measurement to replace GDP?
Thanks!