There’s a lot of interesting stuff around just now on the question what we should and shouldn’t do with measures of aggregate economic performance and welfare. I talked about this in my BrisScience lecture. I make (again) the point the Gross Domestic Product is a bad measure of a nation’s economic welfare because it’s Gross (doesn’t net out depreciation of physical or natural capital), Domestic (doesn’t net out income paid overseas) and a Product (takes no account of labour input)).
But if GDP isn’t a good measure, what is? There are a bunch of alternatives in the air at present such as Gross National Happiness and the Genuine Progress Indicator (the latter has been advocated by Clive Hamilton and the Australia Insitute. These ideas have been getting a fair bit of criticism lately. Andrew Leigh has a go at Gross National Happiness while Nick Gruen writes on the Genuine Progress Indicator for New Matilda. This is subscription only, unfortunately, but when Nick completes his two-part paper, I’ll try to comment more. Andrew Norton at Catallaxy has also written a lot on this.
My general view is close to Nick Gruen’s. We should be trying to get at a Net measure of Full Income (including leisure and taking account of resource stocks) but none of the attempts so far have been really satisfactory. More on this when I get some leisure (As If!).