Prosperity is about more than market values, say experts

Experts continue to question the use of Gross Domestic Product (GDP) as a measure of prosperity.

Researchers say that using GDP to guide policy can be misleading, because of its potential failure to indicate problems such as environmental sustainability or social inclusion.

A side event is being held by the European Economic and Social Committee during the UN COP15 climate conference in Copenhagen, to present several new initiatives aimed at measuring overall “well-being”.

The event includes a presentation of the main findings of a report by the Commission on the Measurement of Economic Performance and Social Progress (CMEPSP), published in September this year.

The CMEPSP is also known as the Stiglitz Commission, after its chair, Professor Joseph E. Stiglitz of Columbia University.

The Stiglitz Commission say that GDP did not succeed in capturing some phenomena which have an increasing impact on the well-being of citizens.

“[I]t has long been clear that GDP is an inadequate metric to gauge well-being over time, particularly in its economic, environmental, and social dimensions,” the report says.

The CMEPSP report also suggests that this inability to properly measure well-being may explain why the financial crisis had such a big impact.

“One of the reasons why the crisis took many by surprise is that our measurement system failed us and/or market participants and government officials were not focusing on the right set of statistical indicators,” the report says.

The drive to look beyond GDP as a way of measuring progress is an important issue for the EU.

The European Commission has published a Communication on "GDP and beyond: Measuring progress in a changing world", which strengthens calls for better indicators of progress.

"The overall aim is to develop more inclusive indicators that provide a more reliable knowledge base for better public debate and policy-making," the document says.

A good standard of health across a population has been suggested by the WHO as a reliable indicator of the overall “well-being” of a society.

“Where policies – in whichever field of action – aim to improve wellbeing in the population, health is a measure of success of those policies,” according to a WHO report on health inequalities.

“Health equity is a measure of the degree to which those policies are able to distribute well-being fairly,” the report adds.

More information about the EESC event on measuring prosperity can be found here.

The CMESP report can be downloaded here.

The Communication from the European Commission is available here.

For more information about the WHO report on health inequalities, please visit this site.

[Image: Michelle Meiklejohn / FreeDigitalPhotos.net]