Joseph Stiglitz on the drawbacks of GDP
We bring you our next installment of the “Is GDP a good measure of wellbeing” debate: In a nutshell, no, saysJoseph Stiglitz in his op-ed last week. Ten years ago, the International Commission on the Measurement of Economic Performance and Social Progress issued its report, Mismeasuring Our Lives: Why GDP Doesn’t Add Up. The report found GDP to be a deeply flawed metric of economic performance and social progress, spurring an international movement of academics, policy-makers, and governments to rethink the metric. The Better Life Index came out of this project: a range of alternatives that better reflect wellness and its catalysts.
New studies highlighted by Stiglitz both support his claim and signal a shift in the conventional wisdom of GDP. Last week, the sixth World Forum on Statistics, Knowledge, and Policy produced a report headlined Beyond GDP: Measuring What Counts for Economic and Social Performance. In addition to exploring topics not previously discussed — including trust, insecurity, inequality, and sustainability — the report explains how poor metrics contributed to deficient policy. For example, if policy-makers had better metrics, they might have been able to anticipate the negative and long-lasting effects of the 2008 financial crash and steered clear of austerity policies that lowered national wealth.
GDP is not for the people: Stiglitz goes further to say that political outcomes often reflect the insecurity of ordinary citizens, which is itself fueled by a narrow range of policies focused on GDP. For example, pension ‘reforms’ force citizens to bear more risk, or labor market ‘reforms’ that weaken employees’ bargaining power. Better metrics would not only properly weigh the costs against the benefits of such reforms, but they would identify problems before they spiral out of control.