Monday, October 26, 2009
The obsession with measuring economic growth
Last month Nicolas Sarkozy breathed new life into the ongoing debate as to whether Gross Domestic Product (GDP), which measures financial growth, is an accurate measurement of a country's state of health, the argument being that GDP ignores other factors vital to the well-being of its population (http://www.theecologist.org/blogs_and_comments/bloggers/jonathon_porritt/325244/sarkozy_deserves_applause_for_his_stance_on_growth.html). Sarkozy endorsed the recommendations of a report he commissioned by Nobel prize-winners Joseph Stiglitz and Amartya Sen. The report criticises the use of GDP statistics as a measure of societal well-being, pointing out that GDP statistics were introduced to measure market economic activity and not well-being. Earlier this year, the UK Sustainable Development Commission's Report Prosperity Without Growth (which was not well received by the Treasury) took a similar line when it highlighted the fact that the current economic crisis provides an opportunity to consider economic models which are not predicated solely on economic/financial growth.