The Misty Grail: The Search for a Comprehensive Measure of Development and the Reasons of GDP Primacy

Felice, Emanuele (2015): The Misty Grail: The Search for a Comprehensive Measure of Development and the Reasons of GDP Primacy.

Abstract

The last decades have seen a flourishing of new indicators to measure economic progress, but none of them has succeded in replacing GDP. Why? The article reviews what are arguably the three most successful alternatives to GDP (the Human Development Index, the Genuine Progress Indica-tor, and the Happy Planet Index), by focusing on their conceptual foundations (the capability ap-proach, utilitarism, the wealth approach, or a mix of these) − rather than on statistical solidity or mathematical refinement as most of the literature does. After discussing their faults, it is shown that the wealth approach underlying GDP can be easily extended to include environmental and well-being components (non-market wealth measured at market prices), and to substantiate this claim es-timates of environment-augmented GDP for 130 countries are presented and discussed. However, up to the present not even this line of research has been successful. This suggests that among the reasons behind GDP primacy there is not only philosophical consistency or statistical soundness, but also social suitability, being the standard GDP more suitable to reflect the goals of capitalist-market economies. Constructing composite indicators alternative to GDP is trivial, until when the current preference system has not been changed. To achieve this change, a dashboard approach may be preferable to composite indicators, since the former provides the different social groups with in-telligible quantitative instruments.

• Item Type: MPRA Paper
• Language: English
• Keywords: GDP, human development, sustainability, composite indicators, wealth
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B40 - General; E - Macroeconomics and Monetary Economics > E0 - General > E01 - Measurement and Data on National Income and Product Accounts and Wealth ; Environmental Accounts; I - Health, Education, and Welfare > I0 - General > I00 - General; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General

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