How do we measure progress? There’s no question that the indicators we use to achieve this are of utmost importance as they underpin key high-level decisions. Since 1944, the measurement indicator we have used is GDP. I am going to work through the flaws of this measure, and suggest alternatives that would more accurately and universally reflect human progress.

Gross Domestic Product (GDP) can be defined as the value of a country’s overall output of goods and services at market prices, excluding net income from abroad.* In other words, the economic value placed on the amount of stuff a country produces. GDP has become the measure of progress. Countries use it to compare how they are doing against other countries. Governments use it to compare how they are doing against past governments.

In truth, it was never intended to be used in the way it is now. Simon Kuznets, the creator of GDP, said of it that, “the welfare of a nation can scarcely be inferred from a measure of national income.”** He disputed its accuracy as an indicator of standard of living. I’m inclined to agree, and I have serious reservations about GDP; honestly I find it astonishing that it is used as it is now. And that’s without even going in to the copious number of methods that governments have come up with allowing them to doctor GDP and present a falsely optimistic picture.

Pure production output fails to take in to consideration the physical or psychological well-being of the citizens, and indeed GDP has often been criticised for this recently. Some have called instead for ‘Gross National Happiness’ as a measure. I object to this, although it does have some merit. I take issue with happiness as a measure, because happiness is a fleeting emotion and my neuroscience background tells me that it exists (like any emotion) purely as a feedback mechanism rather than a long-term state of being that we can attain. I would argue that ‘Gross National Well-being’ is preferable, as our general sense of well-being is less transient than happiness. Perhaps for some people they are one and the same though and I am simply being pedantic.

GDP also fails to consider two concepts which I feel will become of increasing importance given current global trends. Those concepts are resource efficiency and environmental footprint. As we bump harder and harder against the natural limits of the planet, both of these will have to be used as measures of progress. How efficient we are at using resources and minimising waste will matter because of the growing scarcity of global resources. Countries ought to be incentivised to be as efficient as possible with the resources available to them. Similarly, we are making living conditions increasingly precarious through runaway climate change. Widespread deforestation is a danger given the crucial role that trees play in regulating the delicately balanced composition of elements in our atmosphere that we depend on. These are just two examples of environmental footprint; there are many others.

Somehow, it is in our human nature to keep on developing and moving forward; to learn and to create. Improving our sense of well-being and standard of living would seem to be at the heart of this, as we continue to make our lives more comfortable, more safe and more efficient. So this sense of well-being must remain in any measure of progress. Well-being does not go hand in hand with material wealth/output however, and yet GDP as a measure of progresses incentivises material production. By removing material production from progress indicators, you free up other means of improving well-being such as sense of purpose, sense of community, and leisure time to name a few.

So I believe a better measure of progress would incorporate well-being, resource efficiency and environmental impact. In this sense you are capturing the key indicators of progress – the country’s ability to sustain itself and its citizens’ well-being.

The Happy Planet Index developed by the London-based think tank New Economics Foundation is an excellent example of what a true measure of progress could look like – check it out. I would also recommend looking in to the recently launched Social Progress Index.

 

 

 

 

*Taken from The Business Dictionary http://www.businessdictionary.com/definition/gross-domestic-product-GDP.html

**Taken from Wikipedia http://en.wikipedia.org/wiki/Simon_Kuznets