Herewith my op ed from the Herald and Age today.

What is the good life and are we living it?

Assessing and measuring wellbeing has vexed us since ancient times. But a funny thing happened on the modern world’s way to the answer. The metric that economists used to dampen down the business cycle – Gross Domestic Product (GDP) – received such prominence that it ‘went viral’ as we say these days. It became the default measure of national progress.

But there’s lots wrong with GDP as a measure of economic wellbeing let alone more general wellbeing. Measuring gross activity, it ignores the growth and depreciation of assets – such as buildings, equipment, natural resources like farmland and mineral deposits, biodiversity and clean air. And that’s not to mention the greatest asset of all – our knowhow.

Moreover GDP is measured by money changing hands. So converting bread, mince and salad into a hamburger increases GDP in McDonalds but not at home. More starkly, an evening of passion and pleasure only adds to wellbeing as measured by GDP if it happens in a bordello! More broadly still, GDP takes no account of the distribution of income or of our physical or social wellbeing.

But considering how different all these phenomena are, how can we possibly measure their sum impact on national wellbeing in a single number? Because it would ‘dumb down’ complex issues, economics Nobel Laureate Amatya Sen initially refused to participate in the construction of a single index of human development to help guide development in poorer countries. But he relented because he appreciated that, however unsatisfactory a single wellbeing index might be, it was better than the alternative. Given the thirst for simple answers, the alternative is even more dumbing down as would occur if GDP yet again filled the vacuum. Continue reading →