The majority of experts on economic and social development these days agree that traditional economic indicators, such as Gross Domestic Product (GDP) and per capita income, don’t fully reflect the quality of living and development in a particular country. Hence, they are insufficient measures of a country’s overall wellbeing. As they are ‘hard metrics’, GDP and per capita income fail to fully capture quality of life, including education, access to healthcare, infrastructure development, and personal satisfaction.
Despite the fact that thinking beyond GDP when measuring a country’s performance is relatively new, a couple of approaches have already been developed to measure the wellbeing of the country in a broader sense. One of the earliest attempts to assess national wellbeing, taking into account a full range of ‘hard’ and ‘soft’ metrics was Bhutan’s Gross National Happiness Index, developed in 2008. Now there are a number of similar initiatives of different levels of complexity undertaken around the world, including the Beyond GDP programme by the European Union, Measuring a National Well-being programme in the UK and the Better Lives Compendium of Indicators developed by the OECD. All of the the alternative frameworks that have been developed took into consideration a wider range of indicators – from access to healthcare and education, to environmental conditions and personal satisfaction – that seem to be relevant for those living in these countries.
The pitfalls of focusing on GDP alone can be clearly observed in the findings of the 2017 Social Progress Index, which is considered to be the most comprehensive international framework for measuring a country’s wellbeing without focusing on economic performance alone. As an aggregate index of more than 50 social and environmental indicators, the Social Progress Index goes beyond GDP and captures three dimensions of social progress: Basic Human Needs, Foundations of Wellbeing, and Opportunity. Despite the fact that the data collected still proves that people in ‘wealthier’ countries, such as Norway and Germany, generally enjoy the better quality of life as those in lower-income countries, some findings are surprising. The UK, for example, has achieved a much higher level of social progress than Saudi Arabia, having a lower GDP per capita. Moreover, the data shows that economic growth doesn’t necessarily trigger social progress: from 2013 to 2016 China managed to double its GDP per capita, while an overall wellbeing of its citizens remains almost the same.
However, despite the fact that the issue of ‘the economics of happiness’ engrosses the minds of more and more researchers worldwide, there is still no consensus on which economic and social metrics to use to fully capture wellbeing. Moreover, it is not yet clear how to harmonise and standardise these metrics to make sure that the new framework is holistic and no single country is left behind.
Taking into consideration that inclusive growth requires both economic and social progress, DOC Research Institute will continue working on this topic, under its The Economics of Post-Modernity: When Conventional Models Fail research area, in order to develop a new framework that will take into account both economic and social development metrics.