Better than GDP? Beware of wolves bearing gifts

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Richard Moore

Sep 22, 2009, 12:58:29 AM9/22/09
Yes, a 'Stiglitz Index' would be a better measure of national health than GDP. Progressives have been asking for this for decades. But in the context of bankrupt governments, it becomes merely a rationing formula. A way to pacify the peasants by distributing the crumbs equitably among them.

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  • SEPTEMBER 14, 2009, 9:53 AM ET

Sarkozy Adds to Calls for GDP Alternative

French President Nicolas Sarkozy said Monday that the global slump shows gross domestic product is an obsolete way of measuring well-being, and called on countries the world over to adopt recommendations from a report he commissioned by Nobel Prize winner Joseph Stiglitz.

French Finance Minister Christine Lagarde, Nobel Prize-winning economist Joseph Stiglitz, French junior minister for ecology Chantal Jouanno and French Labour Minister Xavier Darcos, are seen following their meeting with French President Sarkozy on Monday.

The Stiglitz report recommends that economic indicators should stress well-being instead of production, and for non-market activities, such as domestic and charity work, to be taken into account. Indexes should integrate complex realities, such as crime, the environment and the efficiency of the health system, as well as income inequality. The report brings examples, such as traffic jams, to show that more production doesn’t necessarily correspond with greater well-being.

“We’re living in one of those epochs where certitudes have vanished… we have to reinvent, to reconstruct everything,” Sarkozy told a press conference at Sorbonne university. “The central issue is [to pick] the way of development, the model of society, the civilization we want to live in.”

Sarkozy commissioned the report at the start of 2008 from a 22-member commission headed by Stiglitz and including Nobel Prize winner Amartya Sen, as well as the then-head statistician of the Organization of Economic Cooperation and Development, Enrico Giovannini.

In the Guardian (U.K.) on Sunday, ahead of Sarkozy’s remarks, Stiglitz explained:

The big question concerns whether GDP provides a good measure of living standards. In many cases, GDP statistics seem to suggest that the economy is doing far better than most citizens’ own perceptions. Moreover, the focus on GDP creates conflicts: political leaders are told to maximise it, but citizens also demand that attention be paid to enhancing security, reducing air, water, and noise pollution, and so forth – all of which might lower GDP growth. The fact that GDP may be a poor measure of well-being, or even of market activity, has, of course, long been recognized. But changes in society and the economy may have heightened the problems, at the same time that advances in economics and statistical techniques may have provided opportunities to improve our metrics.
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