The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [16]
Consumerism on the part of the poor is hard to criticize, although some campaigners, fans of Naomi Wolf’s argument in No Logo, are at the same time dismayed by the cultural baggage of consumerism.15 It is impossible to ignore the benefits of economic growth in poor countries, providing what we consider to be necessities for a decent life, better health and increased longevity. Even so, there is great ambivalence—paradoxically on the left—about poor people having the money to spend on the things we already have.
If the cultural, environmental, and moral concerns aroused by economic growth as described above have a concrete focus, rather than a generalized sense of unease, it is the inadequacy of growth as our measure of progress. The attack on growth has two prongs. One looks literally at the measure used as the target for policy and challenges the use of GDP. Other measures are argued to be more appropriate. The second challenges the merits of growth per se as a policy target.
MEASUREMENT ISSUES
The standard metric for economic success is GDP, adjusted for price increases to reflect true purchasing power, and divided by population to give a per capita measure. The concept of GDP dates back to the need during the Great Depression to be able to measure how much the economy was producing, no more than that. It was never intended to measure social welfare. As a measure it has many well-known flaws, most of them recognized by its creators right from the outset. These are the main ones:
• GDP measures paid-for goods and services including things many people regard as “bads,” or at least “regrettable necessities,” rather than “goods,” such as weapons or tobacco or spending on the police.
• It excludes many positive things such as a parent’s care for children, cooking at home, and housework, because they are not paid for.
• GDP doesn’t take account of the negative consequences of growth, and in particular does not net off the environmental costs such as pollution and greenhouse gas emissions.
• A simple per capita average does not take account of the distribution of incomes and the different weights that might be given to increases in income at the top and bottom of the scale.
• GDP fails to take full account of the improvements in quality and new goods, which are never fully captured in the statistics; this is especially true for big changes in technology.
• GDP does not include many indicators of progress we rightly care about such as health, levels of education, infant mortality, and life expectancy.
The first three of these adjustments would reduce measured GDP, the fourth would do so to the extent that incomes are becoming more unequal, and the fifth would substantially increase measured GDP. The sixth consists of indicators that are not the same kind of measurement at all. Considered important welfare indicators by economists, they feature prominently as measurements of how economies are performing.
One response to this list of inadequacies is to produce an adjusted or alternative measure. A well-known example is the Index of Sustainable Economic Welfare (ISEW), originated by Herman Daly and John Cobb in 1989. The ISEW adjusts for the first three points above and therefore paints a much gloomier picture than the conventional economic statistics.16 “Gross National Happiness” is another contender.17 The most recent one of this type is the Happy Planet Index from the New Economics Foundation.18 All are similar in their emphasis on subtracting environmental impacts from GDP, and in showing next to no “progress” in recent decades. This is wholly because of the way they are constructed.
An alternative, widely used by economists,