GDP godfather Simon Kuznets was the first to warn about its limitations: "The welfare of a nation can...scarcely be inferred from a measurement of national income as defined above." He wrote that during the last depression. What's really depressing is that we still haven't found something better, and not for a lack of want.
Today's Financial Times analysis leads with one of the worst reasons why GDP shouldn't be used as a measure of how well we are doing as a nation:
Across the world, standard measures of economic performance are suddenly producing terrible results. Maybe it is time to change them.
Fortunately, it gets a lot better from there. The article surveys one of Nicolas Sarkozy's lesser known initiatives:
a 24-member commission of prominent economists led by Joseph Stiglitz and Amartya Sen, both Nobel prize winners, is due to report in April on ways of improving our economic bookkeeping. The aim is to render economic data more comprehensive, more intelligible to the public and more relevant for policymakers by taking into account such factors as environmental degradation and quality of life.
I wouldn't hold my breath for the April report to have all the answers, but who knows, perhaps it takes another depression recession to come up with a better GDP measure.
