Another attack on GDP

Yesterday’s New York Times included a useful review of the assaults on the notion of GDP. It reminded readers that as long ago as 40 years ago it was attacked by Robert F Kennedy who said it: “measures everything, in short, except that which makes life worthwhile.” The article also welcomed the review of GDP as a measure of well-being in France and suggested it might apply to America too:

“We may be in the early stages in the United States of recognizing that the gross domestic product is very misleading and something must be done to get better measures of well-being,” said Amartya Sen, a Nobel laureate in economics at Harvard. Professor Sen and Joseph Stiglitz, a Nobel laureate at Columbia, are co-chairmen of a commission recently appointed by Nicolas Sarkozy, the French president, to come up with a better measure for France. While Mr. Sarkozy’s goal is to showcase a ‘quality of life’ at odds with the country’s weak G.D.P., the high-profile effort might yield dividends here as well as abroad.”

Ultimately, as I have previously argued, there is less to these attacks than meets the eye. It would be hard to find someone who argues that GDP is a perfect indicator of well-being. But it does not follow that there is no relationship between rising prosperity and well-being. If there is a problem with GDP in this respect it is that it underestimates the benefits of prosperity to human welfare.