Does GDP really tell us how we're doing?

So, a while back I came across an article that I'd like to share with you. I've been thinking of how we measure progress and so have a great many other minds before me.

GDP - Gross Domestic Product, is used often to refer to a country's standard of living. It is really just the market value of all the goods and services produced within a country in a given period. What you need to consider is that this is strictly an economic tool and economics doesn't count externalities - things like what the goods and services being produced actually are and their cost to clean up.

Even Simon Kuznets, the inventor of the GDP did not intend it to measure “the welfare of a nation.” This is because spending on tobacco, war, cleaning up man-made disasters, building prisons all cause the GDP to rise. Meanwhile, caring for an ailing relative, unpaid housework, volunteer work — all obvious goods — don't show up.

In October, Jim Coyle wrote about the New Canadian Index of Wellbeing, a tool which measures "not just the economy, but how people and communities, the environment and our democracy are faring." The results show that Canadians are working longer and enjoying life less.

'In fact, the report says that while the GDP increased by 31 per cent from 1994 to 2008, the Canadian Index of Wellbeing rose just 11 per cent. Moreover, the wealthiest 20 per cent of people received the lion's share of that growth, while the gap to the bottom 20 per cent grew even larger.

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By comparison, the CIW takes into account the complexity and interconnectedness of human society. It offers a deeper understanding of what constitutes social and individual good. It speaks about relationships, social isolation enjoyment of life. '