An excellent view on why GDP growth is not a good measure for economic health likely cannot be better worded than is in an article by the Harvard Business School: “Other activities included in GDP, such as health care costs, do not reflect the fact that spending more on health care is, in John Caddell’s opinion, “in general not good for the country.”
spending more on health care is in general not good for the country
More to my person opinion, measuring GDP growth as a measure of the economy disappoints me because this suggests to me that we are in a consumerist economy. I have no issue with people desiring whatever goods are desired however attributing these to the health of the economy appears problematic; not all goods are necessary for life and including the unnecessary should not indicate a general higher national economic well-being.
Authors from Boston University provided The Pardee Papers, specifically issue number four from 2009, as an early look into the need to change how we measure GDP. From the abstract: “We critique the inappropriate use of Gross Domestic Product (GDP) as a measure of national well-being, something for which it was never designed.” The authors help readers to understand that measuring GDP as a measure of well-being is problematic by offering the analogy of a building using electricity and that the more electricity used does not necessarily indicate higher quality of life. I find this to be a weak analogy – however it does begin the process of recognizing certain things – as suggested before higher health care spending does not imply higher quality of life. Link to PDF follows.
One alternative measure is examined by Senior Fellow at New America: Georgia Levenson Keohane in an article posted by Time in which a Social Progress Index measures the extent to which countries provide for the social and environmental needs of their citizens. The SPI was developed by the Social Progress Imperative and is based on the writings of Amartya Sen, Douglass North, and Joseph Stiglitz. From this list I’ve read three of Amartya Sen’s books and have concern about inflationary aspects of his lending practices if applied globally, however I take no issue with his belief in assisting the extremely impoverished. It appears the SPI has been in use since the beta version launched in 2013.
Several other alternative measures are reintroduced in a January 2016 article by CBSnews which provides a re-listing and link to a 2008 article from The New York Times.