Beyond GDP

Measuring What Counts for Economic and Social Performance

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Metrics matter for policy and policy matters for well-being. In this report, the co-chairs of the OECD-hosted High Level Expert Group on the Measurement of Economic Performance and Social Progress, Joseph E. Stiglitz, Jean-Paul Fitoussi and Martine Durand, show how over-reliance on GDP as the yardstick of economic performance misled policy makers who did not see the 2008 crisis coming. When the crisis did hit, concentrating on the wrong indicators meant that governments made inadequate policy choices, with severe and long-lasting consequences for many people. While GDP is the most well-known, and most powerful economic indicator, it can’t tell us everything we need to know about the health of countries and societies. In fact, it can’t even tell us everything we need to know about economic performance. We need to develop dashboards of indicators that reveal who is benefitting from growth, whether that growth is environmentally sustainable, how people feel about their lives, what factors contribute to an individual’s or a country’s success. This book looks at progress made over the past 10 years in collecting well-being data, and in using them to inform policies. An accompanying volume, For Good Measure: Advancing Research on Well-being Metrics Beyond GDP, presents the latest findings from leading economists and statisticians on selected issues within the broader agenda on defining and measuring well-being.

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The measurement of economic downturns

This chapter summarises how inadequate metrics (and models) might have affected the assessment of, and response to, the 2008 crisis, and what can be done about it. It argues that GDP may have given an over-optimistic account of how well the economy was doing both prior to the crisis and in the recovery phase, and of the sustainability of growth. The problem was that too many analysts didn’t look beyond GDP. If we had had better metrics, including measures that had incorporated more adequately the increases in people’s economic insecurity, we might have realised that the consequences of the downturn were deeper than the GDP statistics indicated, and governments may have responded more strongly to mitigate the negative impacts of the crisis. The chapter emphasises two shortcomings in standard metrics: only looking at government liabilities while ignoring the asset side of the government (and country’s) balance sheet, and ignoring measures (broader than the standard unemployment metrics) of the unused resources in the labour market. It stresses the need to complete existing data with measures of economic security and subjective well-being, and to include changes in human and social capital in models.

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