New GDP component: happiness?

French President Nicolas Sarkozy proposed a new way of measuring a country’s wealth, believing the “religion of statistics” that has prevailed need to be changed.  He believes it should now include the less quantifiable “happiness” factor.  By modifying research methods used to come up with a country’s GDP, they would be able to include other vital factors that are not currently considered in the way gross domestic product is calculated at present. He plans to propose this in the upcoming G20 summit.

Endorsing the recommendations of a report given to him by Nobel prize winners Joseph Stiglitz and Amartya Sen, he said governments should do away with the “religion of statistics” in which financial prowess was the sole indicator of a country’s state of health.

“For years statistics have registered an increasingly strong economic growth as a victory over shortage until it emerged that this growth was destroying more than it was creating,” said Sarkozy in a speech at the Sorbonne. “The crisis doesn’t only make us free to imagine other models, another future, another world. It obliges us to do so.”

The French President basically endorses this idea which originated from Nobel Laureates Joseph Stiglitz and Amartya Sen.

A new indicator would look at issues such as environmental protection and work/life balance as well as economic output to rate a country’s ability to maintain the “sustainable” happiness of its inhabitants.

“Our economy is supposed to increase our well-being; it is not an end in itself,” said Stiglitz at the launch of the report, commissioned by Sarkozy last year. “GDP statistics were introduced to measure market economic activity. But they are increasingly thought of as a measure of societal well-being, which they are not.”

When I first heard about this idea a few months back, I thought it was rather bizarre.  But now that this was brought up again, I think it’s just sensible.  After all, in basic economics, we look not just at the monetary cost of producing a good, but also at the (negative) externalities.  Why not look at it in the aggregate?

Source: Guardian

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