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Time to Leave GDP Behind Gross Domestic Product Is a Misleading Measure of National Success

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Time to Leave GDP Behind Gross Domestic Product Is a Misleading Measure of National Success COMMENT REGULATION Data suggest the DEVELOPMENT Why policy- ASTRONOMY Planetarium show FUNDING Grant applications FDA is overcautious on makers must admit that puts dark Universe at the should feature multimedia consumer genomics p.286 water is finite p.288 centre of the action p.290 presentations p.291 S/DRAWGOOD.COM I LL E ON BY PETE PETE ON BY I ILLUSTRAT Time to leave GDP behind Gross domestic product is a misleading measure of national success. Countries should act now to embrace new metrics, urge Robert Costanza and colleagues. obert F. Kennedy once said that used GDP-style accounting, it would aim can be estimated, as can the effects of income a country’s gross domestic prod- to maximize gross revenue — even at the inequality2. The psychology of human well- uct (GDP) measures “everything expense of profitability, efficiency, sustain- being can now be surveyed comprehensively Rexcept that which makes life worthwhile”. ability or flexibility. That is hardly smart or and quantitatively3,4. A plethora of experi- The metric was developed in the 1930s sustainable (think Enron). Yet since the end ments has produced alternative measures of and 1940s amid the upheaval of the Great of the Second World War, promoting GDP progress (see Supplementary Information; Depression and global war. Even before growth has remained the primary national go.nature.com/bnquxn). the United Nations began requiring coun- policy goal in almost every country1. The chance to dethrone GDP is now tries to collect data to report national GDP, Meanwhile, researchers have become in sight. By 2015, the UN is scheduled to Simon Kuznets, the metric’s chief architect, much better at meas- announce the Sustainable Development had warned against equating its growth NATURE.COM uring what actually Goals, a set of international objectives to with well-being. For more on does make life worth- improve global well-being. Developing GDP measures mainly market trans- sustainable while. The environ- integrated measures of progress attached actions. It ignores social costs, environmental development goals: mental and social to these goals offers the global commu- impacts and income inequality. If a business go.nature.com/ttay1n effects of GDP growth nity the opportunity to define what 16 JANuaRY 2014 | VOL 505 | NATURE | 283 COMMENT sustainable well-being means, how to be factored in. One example is the genuine them8. And people are not always aware of measure it and how to achieve it. Missing progress indicator (GPI). This metric is cal- the things that contribute to their well-being. this opportunity would condone growing culated by starting with personal consump- Few of us give credit to ecosystem services inequality and the continued destruction tion expenditures, a measure of all spending for water supply and storm protection, for of the natural capital on which all life on by individuals and a major component of example. the planet depends. GDP, and making more than 20 additions Weighted composite measures of several and subtractions to account for factors such indicators. A comprehensive picture of sus- DETHRONING GDP as the value of volunteer work and the costs tainable societal well-being should integrate When GDP was instituted seven decades of divorce, crime and pollution6. subjective and objective indicators9 (see ago, it was a relevant signpost of progress: Crucially, unlike other measures in the Supplementary Information, Figure S1), as increased economic activity was credited first group, GPI considers income distribu- these measures begin to do. One example is with providing employment, income and tion. A dollar’s worth of increased income the Happy Planet Index, introduced by the amenities to reduce social conflict and pre- to a poor person boosts welfare more than New Economics Foundation in 2006. This vent another world war. a dollar’s worth of increased income does multiplies life satisfaction by life expectancy But the world today is very different from for a rich person. And a big gap between the and divides the product by a measure of eco- the one faced by the global leaders who richest and the poor- logical impact. met to plan the post-war economy in 1944 “GDP is est in a country — as Other indices in the third group com- in Bretton Woods, New Hampshire. The dangerously in the United States bine a range of variables, such as income, emphasis on GDP in developed countries inadequate and, increasingly, in housing, jobs, health, civic engagement, now fuels social and environmental insta- as a measure China and India — safety and life satisfaction. The Better Life bility. It also blinds developing countries to of quality of correlates with social Index, developed by the Organisation for possibilities for more-sustainable models of life.” problems, including Economic Co-operation and Develop- development. higher rates of drug ment, maintains a website that allows users Soaring economic activity has depleted abuse, incarceration and mistrust, and to choose how to weight variables, revealing natural resources. Much of the generated poorer physical and mental health5. how the emphasis on different variables can wealth has been unequally distributed, lead- These adjustments matter. A 2013 study2 influence countries’ rankings. ing to a host of social problems5. The phi- comparing the GDP per capita and the GPI Many other experiments are under way losopher John Stuart Mill noted more than per capita of 17 countries comprising just (see www.wikiprogress.org). None of these 200 years ago that, once decent living stand- over half the global population found star- measures is perfect, but collectively they ards were assured, human efforts should be tling divergences between the two metrics. offer the building blocks for something directed to the pursuit of social and moral The measures were highly correlated from much better than GDP. progress and the increase of leisure, not the 1950 until about 1978, when they moved competitive struggle for material wealth. Or apart as environmental and social costs WHY ARE WE STUCK? as the economist John Kenneth Galbraith began to outweigh the benefits of increased There is broad agreement that global society once observed: “To furnish a barren room GDP (see ‘Genuine progress flattens’). Tell- should strive for a high quality of life that is one thing. To continue to crowd in fur- ingly, life satisfaction is highly correlated with is equitably shared and sustainable. Sev- niture until the foundation buckles is quite GPI per capita, but not with GDP per capita. eral groups and reports have concluded another.” Some governments are taking this seri- that GDP is dangerously inadequate as a The limits of GDP are now clear. ously. Two US states, Vermont and Mary- measure of quality of life — including those Increased crime rates do not raise living land, have in the past three years adopted published by the French government’s 2008 standards, but they can lift GDP by raising GPI as a measure of progress and have Commission on the Measurement of Eco- expenditures on security systems. Despite implemented policies specifically aimed at nomic Performance and Social Progress10, the destruction wrought by the Deepwater improving it. the Frederick S. Pardee Center for the Study Horizon oil spill in 2010 and Hurricane Subjective measures of well-being. The of the Longer-Range Future11 and the Euro- Sandy in 2012, both events boosted US GDP most comprehensive of these is the World pean Commission’s ongoing Beyond GDP because they stimulated rebuilding. Values Survey (WVS), which covers about initiative. That conclusion was also echoed 70 countries and includes questions about in ‘The Future We Want’, the declaration WEIGHING THE ALTERNATIVES how satisfied people are with their lives. Alternative measures of progress can be Starting in 1981, the WVS is conducted divided into three broad groups (see Sup- in ‘waves’, the sixth of which is currently GENUINE PROGRESS FLATTENS plementary Information). Those in the first in progress. Another example is the gross World GDP has soared since 1950, but a metric group adjust economic measures to reflect national happiness index used in Bhutan. for life satisfaction called GPI has not. social and environmental factors. The sec- This measure uses elaborate surveys that ask 12 2 SOURCE: REF. ond group consists of subjective measures how content people feel in nine domains: Gross domestic product of well-being drawn from surveys. The third psychological well-being, standard of living, 10 group relies on weighted composite indica- governance, health, education, community tors of well-being including housing, life vitality, cultural diversity, time use and eco- 8 expectancy, leisure time and democratic logical diversity. engagement. Subjective well-being has been highly 6 Adjusted economic measures. These studied, and has even been recommended are expressed in monetary units, making as the most appropriate measure of societal 4 7 Genuine progress them more readily comparable to GDP. progress . But subjective indicators are tricky indicator 2 Such indices consider annual income, net to compare across societies and cultures. For 2005 US$ (thousands) per capita savings and wealth. Environmental costs example, self-reported health tracks with 0 and benefits (such as destroying wetlands clinically reported rates of morbidity and 1950 1960 1970 1980 1990 2000 or replenishing water resources) can also mortality within countries but not across 284 | NATURE | VOL 505 | 16 JanuarY 2014 COMMENT FOX/AP BE : A IGHT ; R EVINE Y E / UP O R G mage /IML I ERIBAR K et : IZZ EFT L Bhutan has measured citizens’ well-being using gross national happiness since 2008 (left); GDP has been in use since the 1944 Bretton Woods meeting (right). of the 2012 Rio+20 UN Conference on Any ‘top-down’ process must be supple- is in the Department of Health Sciences, Sustainable Development agreed to by all mented with a ‘bottom-up’ engagement of University of York, UK.
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