GDP and other quality of life measurements

a briefing document

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Problems with GDP and GNP as measures of well-being

There are serious problems with using GDP [1] as a measure of well-being. GDP measures rely upon money, some economies are considerably more monetarised than others. GDPs also tend to measure disasters and other waste as gains in GNP.

For instance, the necessity to clear up a major oil spill results in a lot of work, thus increasing GDP, but that work can hardly be expected to improve the quality of life. Likewise, crashing your car gives work to the garage and maybe to the local hospital, again increases in the GDP that you, and your country, could well do without!

What makes people happy

In general, happiness is reported to increase until an annual income of approximately US$13,000 income is reached, whence basic needs are met. Happiness then remains stable, even though the income level becomes higher.

PDF document with maps and charts, with general background. The document does not make clear how this applies to dependants and families. (Poverty can be regarded as having an individual income of less than $13,000 p.a. - 2003.)

This is the home site for the happiness index. Subjective well-being by level of economic development summary chart is on page 4 of Genes, culture, democracy and happiness [19-page .pdf].

related material
stress, status, politics and the human condition

Various quality of life indexes

You can find some comments here from Morris, a major worker in the field. Morris believes that the gross national product, used by the World Bank and USAID as a basic indicator of human well-being, is seriously flawed.

“Obviously, no one could stay alive on what a dollar a day will buy at U.S. prices," Morris says. "But the GNP ignores differences in prices and the distribution of income. It also fails to illuminate how efficiently income is spent." For instance, U.S. health expenditures per capita are the highest in the world, but at least 22 countries had better infant and child mortality rates in 1993.

“The PQLI, [2] on the other hand, "tells us not how much has been spent but how effectively lives have improved. While there are many other things we might want to know, infant mortality, life expectancy at age one and basic literacy are central to well-being of the poorest of the poor," he says.”

Here is a summary of the Estes approach to well being, which relies upon items such as school enrolment, life expectancy, external national debts. A more detailed list is available at the link.

See [World] Index of Social Progress [3] for a more detailed summary by Estes of his methods.

More developed sources for reports of this type are indicated and linked from World information resources.

Here you can see another attempt at a quality-of-life index, although it is almost as misleading as the GDP indices. It entirely ignores the clear gains in quality of life described in the PQLI and the WISP above. This index does, however, show up problems in all of the indices mentioned previously, even while adding other problems all its own! The link provided comes with a clear and useful summary of criticism of the rival indices, but avoids discussing the new problems that it introduces.

Conclusion

Only by looking at all the various methods, can you obtain a more rounded understanding of trends of advance or well being in society. Even with all these measures, it is important to realise that there are issues of sustainability. Continual rises in the standard of living are not going to be so marvellous if, at the end of the day, we end up destroying our environment and running out of energy! Items bearing on this may be found here and at replacing fossil fuels: the scale of the problem.

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End notes

1. GDP: gross domestic product;
   GNP: gross national product.
   
   For more background, see the mechanics of inflation: what is money worth?, including the links cited in that section.
   
   
2. PQLI: Physical Quality of Life Index.
   
   
3. WISP: World Index of Social Progress.

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© abelard, 2003, 7 july


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the address for this document is http://www.abelard.org/briefings/quality_of_life.htm

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