AbstractExpectations and information about the growth of GDP per capita have a large influence on decisions made by private and public economic agents. It will be argued here that GDP (per capita) is far from a robust indicator of social welfare, and that its use as such must be regarded as a serious form of market and government failure. This article presents an update on the most important criticisms of GDP as an indicator of social welfare and economic progress. It further examines the nature and extent of the impact of GDP information on the economy, revisits the customary arguments in favour of the GDP indicator, and critically evaluates proposed alternatives to GDP. The main conclusion is that it is rational to dismiss GDP as an indicator to monitor economic progress and to guide public policy. As is clarified, this conclusion does not imply a plea against growth, innovation or national accounting.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-019/3.
Date of creation: 09 Feb 2007
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Distribution; externalities; genuine savings; happiness; HDI; informal sector; ISEW; status goods;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-03 (All new papers)
- NEP-HPE-2007-03-03 (History & Philosophy of Economics)
- NEP-MAC-2007-03-03 (Macroeconomics)
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- Jeroen C.J.M. van den Bergh, 2007.
"Evolutionary Thinking in Environmental Economics,"
Tinbergen Institute Discussion Papers
07-018/3, Tinbergen Institute.
- GÃ©raldine THIRY, 2011. "Beyond Gdp: Conceptual Grounds of Quantification. The Case of the Index of Economic Well-Being (IEWB)," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011048, UniversitÃ© catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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