New Matilda is running a fairly standard piece [subscription required] about the inadequacies of GDP as a measure of wellbeing. It all goes off in the predictable directions – we’re getting richer but no happier, we’re getting more selfish, less community minded, we’re running down our environmental assets. Etc etc. Why is it that people who put forward such important arguments mess them up so much?
I mean it’s a pretty serious subject – so you’d hope that it would involve more than the simple recipe of “take your standard prejudices (if necessary, go next door and borrow some from your neighbour) add and stir”.
Since it’s behind a subscription wall, here are some extracts:
Even as Australia’s economy continues to grow strongly there are deep currents of unease disturbing our enjoyment of the bounty. With the gleaming prize of prosperity comes also the insecurity of large mortgages and a flexible labour market. Long working hours intrude on home and family life. Symptoms of affluenza such as depression, obesity and the use of drugs, both sanctioned and illicit, continue to increase, most alarmingly amongst our children. Self preservation increasingly trumps community involvement and social concern. Behind these everyday concerns lurks the threat of global warming. Our wealth has supposedly doubled since the 1970s but we report feeling not much happier nor more satisfied with life. . .
the paradigm of ever-increasing GDP, unregulated market forces, consumerism and materialism can be challenged quite fundamentally in every respect. As more of us come to understand this, the political feasibility of change will emerge. . . .
A more sensible approach is used in the calculation of an alternative measure called the Genuine Progress Indicator. The GPI uses a proper balance sheet, crediting the good, debiting the bad and calculating the total. The GPI also includes environmental costs such as the loss of soil and forests, oil depletion and climate change. The result of this more sensible accounting is salutary for many Western countries the GPI increased steadily through the 1950s and 1960s but has been pretty stagnant since the 1970s.
Anyway, I wrote the following in the comments thread of the piece.
I guess the GPI is a Good Idea. Unfortunately its biases are all too apparent. I spent some time checking this out a while back and I can’t remember all the details but generally speaking, pretty much any opportunity to reduce the index figure is taken. Thus for instance it gets reduced for depletion and environmental amenity – though many environmental indicators have improved. What does the GPI count for increases in life expectancy? Correct me if I’m wrong but I think ‘zip’ is the technical term.
And here’s a another question. The GPI counts the cost of resource extraction on the assumption that extraction is depletion (there’s an argument there because the known reserves of most resources continue to grow as they are extracted (with oil being the major exception). But what does it count for the immeasurably (well I exaggerate – massively) greater economic value of the property bequeathed by one generation to another? That includes structures etc, but mainly intellectual property like patents, software, blueprints, and of course Marx Brothers and Woody Allen movies. Zip.
New Matilda emailed me and asked for a more extended treatment which I’ll try to give them when I get back to my notes on the subject back at base camp. But the last point about intellectual property has always worried me.
One of the things that worries me is how rarely we see it. What are its implications for the ageing debate for instance? Should we be putting aside a ‘future fund’ or trying to reduce our foreign debt for the benefit of people who we know already we’ll be donating all our IP to? My answer is yes, but equity is the least of my reasons. If Australia is not funding unusually large amounts of investment I like the idea of it being more self sufficient in the supply of its own capital. The world is a dangerous place.