Improving GDP as measure of social progress

September 14, 2009

More than 44 years ago when I first began studying economics my first instructor at the time, Prof. Rubin Simkin at the University of Manitoba pointed out that there were problems with the G.N.P. as an accurate measure of the environment, social progress and happiness.

Simkin, who had worked at the Canadian Dominion Bureau of Statistics and studied at the University of Chicago explained that even Simon Kuznets, the early pioneer and developer of the G.N.P. realised from the beginning that excluding things like the value of domestic work by family members, as well as happiness producing experiences outside of the work place, was a problem in the construction of the index. Armaments in peace time added to the GNP but did they really increase the level of welfare.If factories hummed but workers died prematurely from the environments in the factories could we really say that society was better off ? We have changed our focus from the G.N.P. to the almost comparable concept the G.D.P. but little else has changed. Globalization has resulted in people working harder, being more harassed and more exposed to instability yet the G.D.P.'s rise is all that counts.

Keynes had ruminated on some of these matters, as did people like A.C.Pigou in his work on the economics of welfare and many other economists since had written about these problems. During the 1960s the British L.S.E. economist E.J.Mishan who I later got to meet through my friend Irwin Lipnowski when we were graduate students there and Mishan was his supervisor, had written a best seller, The Costs of Economic Growth which had shown how environmental damage was a largely underestimated side effect of growth. Writers like Karl Kapp, Rachel Carson, Barry Commoner, J.K.Galbraith, Tibor Scitovsky, Herman Daly, Jacov Linder and Rubin Simkin himself had explored these ideas in their writings. The field of welfare economics became a hot topic.

Inspired by Simkin and Mishan and my first employer, the technocratic consultant and former senior civil servant, Hubert Prefontaine, I wrote my M.A. thesis in economics at the
University of Manitoba which   explored how growthamania, an obsession with crude economic growth had led the Manitoba government of the day to a disasterous pulp and paper deal that brought unscrupulous and fraudster business people to defraud over 40 million (1967) dollars from the Manitoba government in the development of Churchill Forest Industries in Manitoba's north. My thesis for awhile was a hot topic. A commission of inquiry later corroborated my argument.

There was a lot intellectual ferment around these issues. But little practical change had resulted.

This past year Nicholas Sarkozy to his great credit created a commission of distinguished economists to study these problems and make a report to the French government on the matter. The blue ribbon commission was chaired by Nobel prize winner Joseph Stiglitz, advised by Prof. Amartya Sen, also a Nobel winner and co-ordinated by Prof.Jean-Paul Fitoussi of France. It recruited a good number of other renowned economists to participate in the discussions which have led to the Commission's report. The Report by the Commission on the Measurement of Economic Performance and Social Progress is now available released today in Paris and posted on the internet. It looks at first glance to be an excellent work and recommended reading for all those economists, and that should be almost everyone, who care about the relevance of the discipline to public policy and the reputation of its data and concepts for accurately capturing meaningful statements about prosperity and well being.

Felicitations M.Sarkozy pour votre vision in appointing such a Commission and the Commission for what at first glance looks to be a   critical job well done.