GDP: Still the Best Available

GDP: Still the Best Available

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INTENSIVE debate became even tougher recently. The world should substitute its main measurement of economic success (GDP), by another indicator on social progress, say the elites. There are some nice arguments on the topic in the ongoing Economist Debate. And the youngest kid on this block was presented by OECD yesterday.

The idea is not a new one. The economics of happiness has solid grounds in the literature already. The main argument is as follows: there are other important things in man’s life than just money. In other words, you don’t have to earn a fortune and still might live a happy life, if your needs and dreams are satisfied.

Well, nothing wrong so far. But let’s decompose the second part of the statement. By saying other needs and dreams we mean a job that satisfies, affordable and decent housing, safe streets, high-quality health care, work-life balance, etc. Tempted to jump to my point right now, I will get back  to the newest OECD Better Life Index.

Guys did a very nice job and an important step when allowing every visitor to set his own weight to different sub-indices.  Now visit the site and try couple of different setting according to your fantasy. Bet you get a scandinavian country in top 5, most of the Central European countries in the middle and you won’t be able to get Turkey out of the last 5 countries.

If you tried you must think I am a psychic! Unfortunately, no. It’s just that all the sub-indices considered by the OECD guys are pretty much correlated with wealth (and strength of negative informal institutions, but that’s another chapter of this book). You just can’t have work-life balance, high-quality education or health care system and reliable law enforcement if you don’t have money.

And that is why GDP won’t be substituted any soon. Because it’s a very reliable single predictor of all the other “better life” indicators.

UPDATE (May 25th): The Economist has supported my idea. No, really. Look here.

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