Essay by Diane Coyle: “How should we measure economic success? Criticisms of conventional indicators, particularly gross domestic product, have abounded for years, if not decades. Environmentalists have long pointed out that GDP omits the depletion of natural assets, as well as negative externalities such as global warming. And its failure to capture unpaid but undoubtedly valuable work in the home is another glaring omission. But better alternatives may soon be at hand.
In 2009, a commission led by Joseph Stiglitz, Amartya Sen, and Jean-Paul Fitoussi spurred efforts to find alternative ways to gauge economic progress by recommending a “dashboard” of indicators. Since then, economists and statisticians, working alongside natural scientists, have put considerable effort into developing rigorous wealth-based prosperity metrics, particularly concerning natural assets. The core idea is to create a comprehensive national balance sheet to demonstrate that economic progress today is illusory when it comes at the expense of future living standards.
In an important milestone in March of this year, the United Nations approved a statistical standard relating to the services that nature provides to the economy. That followed the UK Treasury’s publication of a review by the University of Cambridge’s Partha Dasgupta setting out how to integrate nature in general, and biodiversity in particular, into economic analysis. With the consequences of climate change starting to become all too apparent, any meaningful concept of economic success in the future will surely include sustainability.
The next steps in this statistical endeavor will be to incorporate measures of social capital, reflecting the ability of communities or countries to act collectively, and to extend measurement of the household sector. The COVID-19 pandemic has highlighted how crucial this unpaid work is to a country’s economic health. For example, the US Bureau of Labor Statistics intends to develop a more comprehensive concept of living standards that includes the value of such activity….(More)”.