Forget the GDP

In praise of the “Genuine Progress Indicator.”

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More than a million Americans are diagnosed with cancer each year, and that’s good for the US gross domestic product. In fact, the more we spend on medical bills, the healthier the gdp looks. Back in the 1930s, when Wharton economist Simon Kuznets came up with the idea of tallying the total value of goods and services produced by an economy, he noted that “the welfare of a nation can…scarcely be inferred” from this exercise. And in 1968, Robert F. Kennedy said, “Gross national product counts air pollution and cigarette advertising and ambulances to clear our highways of carnage…It measures everything, in short, except that which makes life worthwhile.”

So why is the gdp still the ubiquitous yardstick for the economy’s well-being? One alternative is the “genuine progress indicator” or gpi, developed by the think tank Redefining Progress. It includes social costs and benefits along with raw economic activity; thus divorce, with its attendant legal fees, is good for the gdp but bad for the gpi. While America’s gdp per capita more than tripled between 1950 and 2004, our gpi less than doubled.

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