The problem with alternatives to GDP

The OECD tells us that life is getting better in many ways. Which is true of course, life is getting better in many ways. But this report also shows the major problem with using any of the proposed alternatives to GDP as a measure of the economy.

But the report’s extensive data shows that not all aspects of well-being have improved: median household wealth and the performance of school students in international science tests have fallen, while housing affordability, voter turnout and income inequality have stagnated since 2010. People in the top 20% of the income distribution still earn over five times more than people in the bottom 20%.

Perhaps income inequality is a bad thing. Perhaps it’s a good thing. Whichever it is it’s a value judgement either way. Which is exactly the problem with these alternatives to GDP. Any and all of them smuggle in such subjective value judgements into something that is supposedly an objective measure of how we’re doing.

Yes, there are problems with GDP but it is at least objective - it’s the value added, at market prices, in the economy.

We think that GDP can be made better. That it should in fact be Net National Income we think is correct. But the extensions suggested beyond that are, we insist, a mistake. For they’re all attempts to smuggle into this meant to be objective measure entirely subjective value judgements. Like the merits or not of income inequality to mention just the one.