Netherlands beyond GDP: A Wellbeing Index

Since the modern conceptualization of GDP (Kuznets, 1934), serious concerns have been raised to point out that it cannot properly represent wellbeing of a society. Despite the recent reaffirmations of these concerns (Stiglitz et al., 2009; OECD, 2011), GDP is still the dominant indicator. While dashboard approaches have their merits, we pursue to advance a composite wellbeing index as an alternative to GDP in measuring the progress of society. This approach here is documented for the Netherlands, though it can be applied to any advanced economy. Care has been taken to address methodological problems that arise from the index compilation exercise by using appropriate international goalposts from the Netherlands’ peer countries. To avoid making subjective choices in choosing the relative weights of various indicators we utilize the weights reported by the users of the OECD’s Better Life initiative from the Netherlands. With respect to the results of the indicator, it turns out that the recent financial crisis took a couple of years more to gradually hit the Netherlands from the various wellbeing angles, compared to GDP per capita. At the same time, in terms of our wellbeing measure, the Netherlands lost over a decade, as in 2015 the wellbeing index remains lower than in 2006.