On alternative measures to GDP

One of the pleasures of being abroad or somewhere different is to read the local/national newspapers. Right now in San Francisco I have been doing that and have to say, for an exciting, dynamic country they are surprisingly dull. I’m now not altogether surprised that so many regional newspapers have gone to the wall in the USA.  If you can forgive the tub-thumping patriotism, the likes of the Yorkshire Post knocks spots off the San Francisco Chronicle. And the Sunday Times for half the price is about 3 times better that the $6 plus sales tax NY Times on Sunday.

In contrast, the magazines though are a delight. They are a whole new level of vibrancy, content-rich and colour – as good as America’s newspapers are bad. And so to the theme of this post.  Today I picked up a copy of the Yale Economic Review – an academic magazine no less that I could actually buy in the shop. Would that be so in England !

In a piece entitled “A New Measure of Economic Performance”, Daniel Hornung points out that measuring growth in production, as in GDP, does not impart good information about actual living standards. Citing a report by Stiglitz and Sen,  amongst other points he posits that’s what needed is a measure that takes into account income and spending.  How much people are taking home and prepared to spend is a much closer indicator to how well off they really are.

Of course in most countries, we know what the data is on income and spending, the questions is how to roll it all into one and get something better than GDP?

The original report was commissioned by President Sarkozy and can be dowloaded here.