The rise and fall of GDP
Source Louis Proyect
Date 10/05/16/11:27

NY Times Sunday Magazine May 10, 2010
The Rise and Fall of the G.D.P.

WHATEVER YOU MAY think progress looks like — a rebounding stock market,
a new house, a good raise — the governments of the world have long held
the view that only one statistic, the measure of gross domestic product,
can really show whether things seem to be getting better or getting
worse. G.D.P. is an index of a country’s entire economic output — a
tally of, among many other things, manufacturers’ shipments, farmers’
harvests, retail sales and construction spending. It’s a figure that
compresses the immensity of a national economy into a single data point
of surpassing density. The conventional feeling about G.D.P. is that the
more it grows, the better a country and its citizens are doing. In the
U.S., economic activity plummeted at the start of 2009 and only started
moving up during the second half of the year. Apparently things are
moving in that direction still. In the first quarter of this year, the
economy again expanded, this time by an annual rate of about 3.2 percent.

All the same, it has been a difficult few years for G.D.P. For decades,
academics and gadflies have been critical of the measure, suggesting
that it is an inaccurate and misleading gauge of prosperity. What has
changed more recently is that G.D.P. has been actively challenged by a
variety of world leaders, especially in Europe, as well as by a number
of international groups, like the Organization for Economic Cooperation
and Development. The G.D.P., according to arguments I heard from
economists as far afield as Italy, France and Canada, has not only
failed to capture the well-being of a 21st-century society but has also
skewed global political objectives toward the single-minded pursuit of
economic growth. “The economists messed everything up,” Alex Michalos, a
former chancellor at the University of Northern British Columbia, told
me recently when I was in Toronto to hear his presentation on the
Canadian Index of Well-Being. The index is making its debut this year as
a counterweight to the monolithic gross domestic product numbers. “The
main barrier to getting progress has been that statistical agencies
around the world are run by economists and statisticians,” Michalos
said. “And they are not people who are comfortable with human beings.”
The fundamental national measure they employ, he added, tells us a good
deal about the economy but almost nothing about the specific things in
our lives that really matter.

In the U.S., one challenge to the G.D.P. is coming not from a single new
index, or even a dozen new measures, but from several hundred new
measures — accessible free online for anyone to see, all updated
regularly. Such a system of national measurements, known as State of the
USA, will go live online this summer. Its arrival comes at an opportune
moment, but it has been a long time in the works. In 2003, a government
official named Chris Hoenig was working at the U.S. Government
Accountability Office, the investigative arm of Congress, and running a
group that was researching ways to evaluate national progress. Since
2007, when the project became independent and took the name State of the
USA, Hoenig has been guided by the advice of the National Academy of
Sciences, an all-star board from the academic and business worlds and a
number of former leaders of federal statistical agencies. Some of the
country’s elite philanthropies — including the Hewlett, MacArthur and
Rockefeller foundations — have provided grants to help get the project

Things have evolved since then. When I first visited Hoenig in
Washington early last winter, State of the USA was a willfully obscure,
nonpartisan, nonprofit organization operating out of an unremarkable
office building near DuPont Circle. Hoenig was amassing data on subjects
like Americans’ education and health and getting ready to put the
information online. But tucked inside the health care bill that
President Obama recently signed, on Page 562, is a provision requiring
Congress to help finance and oversee the creation of a “key national
indicators” system — that is to say, Hoenig’s State of the USA will
become a national-indicators panel, run by the National Academy of
Sciences. Think of it as a report card meant to show a country’s
citizens the exact areas — in health, education, the environment and so
forth — where improvement is called for; such indicators would also
record how we improve, or fail to improve, over time. The State of the
USA intends to ultimately post around 300 indicators on issues like
crime, energy, infrastructure, housing, health, education, environment
and the economy. All areas of measurement will be chosen by members of
the National Academy; all will be reviewed for rigor and accuracy by a
panel of accomplished experts. With easy access to national information,
Hoenig told me optimistically, Americans might soon be able “to shift
the debate from opinions to more evidence-based discussions to ideally a
discussion about what solutions are and are not working.”

Those involved with the self-defined indicators movement — people like
Hoenig, as well as supporters around the world who would like to
dethrone G.D.P. — argue that achieving a sustainable economy, and a
sustainable society, may prove impossible without new ways to evaluate
national progress. Left unanswered, however, is the question of which
indicators are the most suitable replacements for, or most suitable
enhancements to, G.D.P. Should they measure educational attainment or
employment? Should they account for carbon emissions or happiness? As
Hoenig himself is inclined to say, and not without some enthusiasm, a
new panel of national measures won’t necessarily settle such arguments.
On the contrary, it will have a tendency to start them.

High-G.D.P. Man vs. Low-G.D.P. Man

For now at least, G.D.P. holds almost unassailable sway, not only as the
key national indicator for the economic health of the United States but
also for that of the rest of the world’s developed countries, which
employ a standardized methodology — there’s actually a handbook — to
calculate their economic outputs. And, as it happens, there are some
good reasons that everyone has depended on it for so long. “If you want
to know why G.D.P. matters, you can just put yourself back in the 1930
period, where we had no idea what was happening to our economy,” William
Nordhaus, a Yale economist who has spent a distinguished career thinking
about economic measurement, told me recently. “There were people then
who said things were fine and others who said things weren’t fine. But
we had no comprehensive measures, so we looked at things like boxcar
loadings.” If you compare the crisis of 1930 with the crisis of 2008,
Nordhaus added, it has made an enormous difference to track what’s
happening in the economy through indexes like G.D.P. Such knowledge can
enable a quick and informed policy response, which in the past year took
shape as a big stimulus package, for example. To Nordhaus, in fact, the
G.D.P. — the antecedents of which were developed in the early 1930s by
an economist named Simon Kuznets at the federal government’s request —
is one of the greatest inventions of the 20th century. “It’s not a
machine or a computer,” he says, “and it’s not the way you usually think
of an invention. But it’s an awesome thing.”

G.D.P. statistics are calculated a dozen times a year on the fifth floor
of a modern office building on L Street in Washington, where a
government economist named Steve Landefeld huddles with a group of staff
members and reviews a large pile of data compiled by his agency, the
Bureau of Economic Analysis, a part of the U.S. Department of Commerce.
For an entire day, the suite of offices where Landefeld’s group works is
placed under what he calls “lockup.” Cellphones are handed in; land
lines and Internet connections are cut off; curtains are drawn tight.
Only certain personnel are allowed in and out. The men and women with
Landefeld then spend the day following a process that has been refined
over the past 50 years. It is a complicated affair, involving the
convergence of some 10,000 streams of data that describe recent economic
activity in the U.S., but the group’s goal is fairly simple: to arrive
at a single number and then explain it in a press release. By tradition,
no one in the room says the final number aloud — a throwback to the old
days, apparently, when the fear of hidden microphones prompted silent
acclamation. The finished press release is photocopied a couple of
hundred times and then locked up, except for a single copy delivered at
the end of the day to the chairman of the president’s Council of
Economic Advisers. Anyone who knows the figure at this point is
forbidden to reveal it, lest its premature unveiling roil the global
financial markets. Not until 8:30 the next morning will Landefeld’s
agency release the G.D.P. number to the rest of the world.

Government statisticians like Landefeld do not push any equivalency
between an expanding G.D.P. and national progress. For them, G.D.P. is
what it is and nothing more: a description of total national production
that can be helpful when setting economic policy. The longtime tendency
of politicians to use G.D.P. as a proxy for national well-being is not a
practice the Bureau of Economic Analysis endorses or could necessarily
control, even if it wanted to. That the Obama administration, for
instance, has pointed to rebounding G.D.P. numbers rather than our
unusually high unemployment numbers reflects a political calculation
rather than a case of economists beating a drum for the glory of G.D.P.

But criticisms of G.D.P. go deeper than just its use, or misuse, by
politicians. For years, economists critical of the measure have enjoyed
spinning narratives to illustrate its logical flaws and limitations.
Consider, for example, the lives of two people — let’s call them
High-G.D.P. Man and Low-G.D.P. Man. High-G.D.P. Man has a long commute
to work and drives an automobile that gets poor gas mileage, forcing him
to spend a lot on fuel. The morning traffic and its stresses aren’t too
good for his car (which he replaces every few years) or his
cardiovascular health (which he treats with expensive pharmaceuticals
and medical procedures). High-G.D.P. Man works hard, spends hard. He
loves going to bars and restaurants, likes his flat-screen televisions
and adores his big house, which he keeps at 71 degrees year round and
protects with a state-of-the-art security system. High-G.D.P. Man and
his wife pay for a sitter (for their kids) and a nursing home (for their
aging parents). They don’t have time for housework, so they employ a
full-time housekeeper. They don’t have time to cook much, so they
usually order in. They’re too busy to take long vacations.

As it happens, all those things — cooking, cleaning, home care,
three-week vacations and so forth — are the kind of activity that keep
Low-G.D.P. Man and his wife busy. High-G.D.P. Man likes his washer and
dryer; Low-G.D.P. Man doesn’t mind hanging his laundry on the
clothesline. High-G.D.P. Man buys bags of prewashed salad at the grocery
store; Low-G.D.P. Man grows vegetables in his garden. When High-G.D.P.
Man wants a book, he buys it; Low-G.D.P. Man checks it out of the
library. When High-G.D.P. Man wants to get in shape, he joins a gym;
Low-G.D.P. Man digs out an old pair of Nikes and runs through the
neighborhood. On his morning commute, High-G.D.P. Man drives past
Low-G.D.P. Man, who is walking to work in wrinkled khakis.

By economic measures, there’s no doubt High-G.D.P. Man is superior to
Low-G.D.P. Man. His salary is higher, his expenditures are greater, his
economic activity is more robust. You can even say that by modern
standards High-G.D.P. Man is a bigger boon to his country. What we can’t
really say for sure is whether his life is any better. In fact, there
seem to be subtle indications that various “goods” that High-G.D.P. Man
consumes should, as some economists put it, be characterized as “bads.”
His alarm system at home probably isn’t such a good indicator of his
personal security; given all the medical tests, his health care
expenditures seem to be excessive. Moreover, the pollution from the
traffic jams near his home, which signals that business is good at the
local gas stations and auto shops, is very likely contributing to social
and environmental ills. And we don’t know if High-G.D.P. Man is living
beyond his means, so we can’t predict his future quality of life. For
all we know, he could be living on borrowed time, just like a wildly
overleveraged bank.

G.D.P. vs. Human Development Index

Simon Kuznets, the inventor of so-called national accounts — the
collection of indicators calculated by the Bureau of Economic Analysis
that now includes G.D.P. and a host of other economic and financial
measures — actually harbored concerns about his creation from the start.
As Steve Landefeld pointed out to me, Kuznets worried that the nation’s
economic activity might be mistaken for its citizens’ well-being. Many
years later, in Kuznets’s Nobel Prize lecture in 1971, he also offered a
list of ways his measures might be improved. “It seems fairly clear,” he
said then, “that a number of analytical and measurement problems remain
in the theory and in the evaluation of economic growth.”

Most criticisms of G.D.P. since then have tended to fall into two
distinct camps. The first group maintains that G.D.P. itself needs to be
fixed. High-G.D.P. Man and Low-G.D.P. Man have to become one, in effect.
This might entail, for starters, placing an economic value on work done
in the home, like housekeeping and child care. Activities that are
currently unaccounted for, like cooking dinner at your own stove, could
also be treated the same as activities that are now factored into
G.D.P., like food prepared in a restaurant. Another fix might be to
cease giving only positive values to events that actually detract from a
country’s well-being, like hurricanes and floods; both boost G.D.P.
through construction costs.

The second group of critics, meanwhile, has sought to recast the
criticism of G.D.P. from an accounting debate to a philosophical one.
Here things get far more complicated. The argument goes like this: Even
if G.D.P. was revised as a more modern, logical G.D.P. 2.0, our reliance
on such a measure suggests that we may still be equating economic growth
with progress on a planet that is possibly overburdened already by human
consumption and pollution. The only way to repair such an imbalance
would be to institutionalize other national indicators (environmental,
say, or health-related) to reflect the true complexity of human
progress. Just how many indicators are required to assess societal
health — 3? 30? 300, à la State of the USA? — is something economists
have been struggling with for years as well.

So far only one measure has succeeded in challenging the hegemony of
growth-centric thinking. This is known as the Human Development Index,
which turns 20 this year. The H.D.I. is a ranking that incorporates a
nation’s G.D.P. and two other modifying factors: its citizens’
education, based on adult literacy and school-enrollment data, and its
citizens’ health, based on life-expectancy statistics. The H.D.I., which
happens to be used by the United Nations, has plenty of critics. For
example, its three-part weightings are frequently criticized for being
arbitrary; another problem is that minor variations in the literacy
rates of developed nations, for example, can yield significant
differences in how countries rank.

One economist who helped create the Human Development Index was Amartya
Sen, a Nobel laureate in economics who teaches at Harvard. When I met
with Sen on a recent evening in New York, he suggested that if I wanted
to place the recent arguments about G.D.P., progress and economic growth
into a historical context, I should really take a minute to hear why and
how the Human Development Index came together.

One day in October 1953, Sen said, he was on his way to a lecture at
Cambridge University when he fell into a conversation with a student
named Mahbub ul Haq. The two young men — Sen was from India, Haq from
Pakistan — soon became friends. “We often chatted in the evening,” Sen
recalled. “Not so much about measurement. But we thought there was a
silliness about identifying growth with development.” Many professors at
Cambridge suggested that if a country could increase its G.D.P., then
all the good things would follow. “But that seemed to both Mahbub and me
to be wrong,” Sen said. A decade later, when Sen was visiting his friend
at his home in Karachi, the two would look out over the city in the
evenings and talk more about the problems with G.D.P. “Mahbub would say:
‘If India and Pakistan were to grow as fast as we can possibly imagine,
when you and I are 50, India and Pakistan’s per capita income will only
be getting close to Egypt’s. Is that all we want?’ ” In time, Haq began
to consider measures (in health and education, mostly) that he thought
could lead to policies that would make life in countries like Pakistan
enormously better, even without large gains in G.D.P. This was not an
argument against G.D.P., Sen emphasized to me. “It was an argument
against relying only on G.D.P.” Many years afterward, when Haq asked Sen
to help him devise the Human Development Index, Sen recoiled at the
idea. “I told Mahbub that it’s vulgar to capture in one number an
extremely complex story, just as G.D.P. is vulgar. And he called me back
and said: ‘Amartya, you’re exactly right. What I want you to do is
produce an index as vulgar as G.D.P. but more relevant to our own lives.’ ”

Sen said he eventually came around to seeing the wisdom in Haq’s
pragmatism. The H.D.I. made its debut in 1990; Haq died in 1998. Sen
told me he thinks the index has been extremely useful for tracking the
progress of the world’s poorer nations. But since he and Haq did their
initial work, Sen said, the world has changed. There are much better
survey data now, which allow for new types of economic and social
measurement. What’s more, he added, the problems associated with climate
change and sustainability have become far more pressing. These were two
of the reasons that, a couple of years ago, Sen joined the Nobel
laureate Joseph Stiglitz and the French economist Jean-Paul Fitoussi on
a commission established by President Nicolas Sarkozy of France to
consider alternatives to G.D.P.

The third reason was that he saw an opportunity to continue the work he
began with Haq, but this time with respect to the world’s richer
nations. “Joe has a little bit of the pragmatism that pushed Mahbub,”
Sen said, referring to Stiglitz, who was the driving force behind the
commission’s work. “You can see when push comes to shove, he’d say, ‘For
God’s sake, let’s do something that changes the world.’ ”

The Stiglitz Commission and Its Dashboard

Several times last fall, I visited Stiglitz’s office at Columbia
University, where he is on the faculty, to talk about the shortcomings
of G.D.P. Sometimes we chatted about accounting issues — why he thinks
G.D.P. creates a distorted representation of our economic lives, for
instance, and how that might be remedied. In his view, Americans would
have had a much clearer picture of our progress over the past decade if
we had focused on median income rather than G.D.P. per capita, which is
distorted by top earners and corporate profits. “When you have
increasing inequality, median and average behave differently,” Stiglitz
said. Real median household income has actually dipped since 2000. But
G.D.P. per capita, he noted, has gone up. A president could go on the
podium, Stiglitz said, and point to G.D.P. as proof that Americans are
doing very well. But if you looked instead at median income, he said,
“you could say, a) it’s not sustainable; and b) most people are actually
worse off.” We need to focus on those median figures, he insisted.

Most frequently in our conversations, Stiglitz gravitated to the
philosophical questions of measuring progress. What are the best
indicators beyond G.D.P.? How do you actually pick the most important
ones? As Stiglitz recounted, Sarkozy gave the commission freedom to tear
apart G.D.P. as its members saw fit. No doubt, the French president saw
political advantages in the undertaking. With a more comprehensive set
of indicators, a leader trying to steer a course through a faltering
economy could conceivably point to successes in areas other than jobs or
productivity. “I can tell you what Sarkozy told me about what motivated
him,” Stiglitz said. “What he said was that he felt this tension — he is
told to maximize G.D.P. but he also knows as a good politician that what
people care about are things like pollution and many other dimensions to
the quality of life. Those dimensions aren’t well captured in G.D.P. And
that puts him in a difficult position. When he comes up for election,
people are going to grade him on G.D.P., but people are also going to
grade on the quality of life. And so he sort of said, Can’t you in some
way resolve this tension by constructing measures that don’t pose these

The Stiglitz-Sen-Fitoussi Commission, as it eventually came to be known
— its official title was the Commission on the Measurement of Economic
Performance and Social Progress — grew to about two dozen members and
met in Europe and the U.S. several times in 2008 and 2009. Many of the
members leaned to the left, even as Sarkozy is characterized in French
politics as leaning to the right. Stiglitz brought in, among others, the
Princeton psychologist and Nobel laureate in economics Daniel Kahneman,
as well as Enrico Giovannini, the president of the Italian National
Institute of Statistics and the international economist most closely
involved with the indicators movement over the past decade. In
September, the commission issued a formidable report, nearly 300 pages
long, that offered an exhaustive list of suggestions, some
methodological and some philosophical, for measuring the progress of
nations in the 21st century. “We very quickly came to a consensus that
you weren’t going to get one number for a new G.D.P. number, but that it
would have been nice,” Stiglitz told me. In fact, the commission
endorsed both main criticisms of the G.D.P.: the economic measure itself
should be fixed to better represent individuals’ circumstances today,
and every country should also apply other indicators to capture what is
happening economically, socially and environmentally. The commission
sought a metaphor to explain what it meant. Eventually it settled on an

Suppose you’re driving, Stiglitz told me. You would like to know how the
vehicle is functioning, but when you check the dashboard there is only
one gauge. (It’s a peculiar car.) That single dial conveys one piece of
important information: how fast you’re moving. It’s not a bad comparison
to the current G.D.P., but it doesn’t tell you many other things: How
much fuel do you have left? How far can you go? How many miles have you
gone already? So what you want is a car, or a country, with a big
dashboard — but not so big that you can’t take in all of its information.

The question is: How many measures beyond G.D.P. — how many dials on a
new dashboard — will you need? Stiglitz and his fellow academics
ultimately concluded that assessing a population’s quality of life will
require metrics from at least seven categories: health, education,
environment, employment, material well-being, interpersonal
connectedness and political engagement. They also decided that any
nation that was serious about progress should start measuring its
“equity” — that is, the distribution of material wealth and other social
goods — as well as its economic and environmental sustainability. “Too
often, particularly I think in an American context, everybody says, ‘We
want policies that reflect our values,’ but nobody says what those
values are,” Stiglitz told me. The opportunity to choose a new set of
indicators, he added, is tantamount to saying that we should not only
have a conversation about recasting G.D.P. We should also, in the
aftermath of an extraordinary economic collapse, talk about what the
goals of a society really are.

Taking the Environment Into Account

The report from the Stiglitz-Sen-Fitoussi commission isn’t a blueprint,
exactly — it’s more like open-source software, posted online for anyone
to download, discuss and modify. It doesn’t tell countries how they
should measure progress. It tells them how they should think about
measuring progress. One challenge here — something that the commission’s
members well understood — is that recommending new indicators and
actually implementing them are very different endeavors. Almost everyone
I spoke with in the indicators movement, including Chris Hoenig at State
of the USA, seems to agree that at the moment our reach exceeds our
grasp. When I met with Rebecca Blank, the under secretary of commerce
for economic affairs, whose job it is to oversee the data agencies that
put together G.D.P., she noted that new national measures depend on more
than a government’s willingness; they also necessitate additional
financing, interagency cooperation and great leaps in the science of
statistical analysis. Blank wasn’t averse to some of the commission’s
recommendations — indeed, she recently endorsed the idea, proposed by
Steve Landefeld at the Bureau of Economic Analysis, that our national
accounts add a “household perspective” that represents individuals’
economic circumstances better than G.D.P. “But some of the constraint is
we don’t have the money to do it,” she told me, referring to various new
measures. “Some of the constraint is we know how to do it, but we need
to collect additional data that we don’t currently have. And some of the
constraint is that we don’t really know how to do it quite yet.”

Environmental and sustainability indicators offer a few good examples of
how big the challenge is. A relatively easy first step, several members
of the Stiglitz commission told me, would be to build in a “depletion
charge” to G.D.P. for the natural resources — oil, gas, timber and even
fisheries — that a country transforms into dollars. At the moment, we
don’t do this; it’s as if these commodities have no value until they are
extracted and sold. A charge for resource depletion might not affect
G.D.P. in the United States all that much; the country is too big and
too thoroughly based on knowledge and technology industries for the
depletion costs of things like coal mining and oil drilling to make much
of an impact. On the other hand, in countries like Saudi Arabia and
China, G.D.P. might look different (that is to say, lower) if such a
charge were subtracted from their economic outputs. Geoffrey Heal, a
professor at Columbia who worked on the environmental aspects of the
commission’s report, told me that including resource depletion in the
national accounts — something the U.S. considered in the early 1990s and
then abandoned for political reasons — could be implemented within a
year if the world’s developed nations agreed to do it. After that, he
suggests, a next step might be to subtract from G.D.P. the cost of the
health problems — asthma and early deaths, for instance — caused by air
pollutants like sulfur dioxide.

But environmental accounting gets more difficult. “We can put monetary
values on mineral stocks, fisheries and even forests, perhaps,” Heal
says. “But it’s hard to put a monetary value on alteration of the
climate system, loss of species and the consequences that might come
from those.” On the other hand, Heal points out, you have to decide to
measure something difficult before you can come up with a technique for
measuring it. That was the case when the U.S. decided to create national
accounts on economic production during the Great Depression. What the
Stiglitz commission ultimately concluded was that it’s necessary to make
a few sustainability dials on the dashboard simply raw data —
registering things like a country’s carbon footprint or species
extinctions — until we figure out how to give the effects approximate
monetary values. Maybe in 10 years, Heal guesses, economists would be
able to do that.

To Heal, making a real and rapid effort at calculating these costs and
then posting the information is imperative. According to Heal, we have
no sense of how much “natural capital” — our stocks of clean air and
water and our various ecosystems — we need to conserve to maintain our
economy and our quality of life. “If you push the world’s natural
capital below a certain level,” Heal asks, “do you so radically alter
the system that it has a long-term impact on human welfare?” He doesn’t
know the answer. Yet, he adds, if we were to pass that point — and at
present we have no dials to indicate whether we have — then we couldn’t
compensate for our error through technological innovation or energy
breakthroughs. Because by then it would be too late.

Putting a Number on Happiness

As difficult as it might be to compile sustainability indicators, it’s
equally challenging to create measures that describe our social and
emotional lives. In this area, there’s a fair amount of skepticism from
the academic establishment about putting happiness onto a national
dashboard of well-being. William Nordhaus of Yale told me that some of
the measurements are “absurd.” Amartya Sen, too, told me that he has
reservations about the worth of statistics that purport to describe
human happiness.

Stiglitz and his colleagues nevertheless concluded that such research
was becoming sufficiently rigorous to warrant its possible inclusion. At
first the connection to G.D.P. can be puzzling. One explanation,
however, is that while our current economic measures can’t capture the
larger effects of unemployment or chronic depression, providing policy
makers with that information may influence their actions. “You might
say, If we have unemployment, don’t worry, we’ll just compensate the
person,” Stiglitz told me. “But that doesn’t fully compensate them.”
Stiglitz pointed to the work of the Harvard professor Robert Putnam, who
served on the Stiglitz-Sen-Fitoussi commission, which suggests that
losing a job can have repercussions that affect a person’s social
connections (one main driver of human happiness, regardless of country)
for many years afterward.

When I caught up with Putnam, he said that the “damage to this country’s
social fabric from this economic crisis must have been huge, huge,
huge.” And yet, he noted, “We have plenty of numbers about the economic
consequences but none of the numbers about the social consequences.”
Over the past decade, Putnam has been working on measures — having to do
with church attendance, community involvement and the like — to quantify
our various social links; just recently, the U.S. Census Bureau agreed
to include questions of his in some of its monthly surveys. Still, his
efforts are a work in progress. When I asked Putnam whether government
should be in the business of fostering social connections, he replied,
“I don’t think we should have a government Department of Friendship that
introduces people to one another.” But he argued that just as
registering the social toll of joblessness would add a dimension of
urgency to the unemployment issue, it seemed possible that measuring
social connections, and putting those measures on a national dashboard,
could be in society’s best interests. As it happens, the Canadian Index
of Well-Being will contain precisely such a measure; and it’s very
likely that a related measure of “social capital,” as it’s often called,
will become a State of the USA indicator too. “People will get sick and
die, because they don’t know their neighbors,” Putnam told me. “And the
health effects of social isolation are of the same magnitude as people
smoking. If we can care about people smoking, because that reduces their
life expectancy, then why not think about social isolation too?”

It seems conceivable, in fact, that including various measures of
emotional well-being on a national dashboard could lead to policies
quite different from what we have now. “There’s an enormous inequality
of suffering in society,” Daniel Kahneman told me recently. By his
estimate, “if you look at the 10 percent of people who spend the most
time suffering, they account for almost half of the total amount of
suffering.” Kahneman suggested that tremendous social and economic gains
could therefore be made by dealing with the mental-health problems —
depression, say — of a relatively small fraction of the population. At
the same time, he added, new measures of emotional well-being that he
has been working on might soon give us a more enlightened perspective on
the complex relationship between money and happiness.

Currently, research suggests that increased wealth leads us to report
increased feelings of satisfaction with our lives — a validation, in
effect, that higher G.D.P. increases the well-being in a country. But
Kahneman told me that his most recent studies, conducted with the
Princeton economist Angus Deaton, suggest that money doesn’t necessarily
make much of a difference in our moment-to-moment happiness, which is
distinct from our feelings of satisfaction. According to their work,
income over about $70,000 does nothing to improve how much we enjoy our
activities on a typical day. And that raises some intriguing questions.
Do we want government to help us increase our sense of satisfaction? Or
do we want it to help us get through our days without feeling misery?
The two questions lead toward two very different policy options. Is
national progress a matter of making an increasing number of people very
rich? Or is it about getting as many people as possible into the middle

The Political Resistance

Over the past few months, the recommendations of the
Stiglitz-Sen-Fitoussi commission have been taken up for debate by the
European Union’s statistical office as well as by the Paris-based
Organization for Economic Cooperation and Development, which serves as a
kind of policy forum for the world’s developed countries. To Stiglitz
and his colleagues, an ideal outcome would be a consensus by these
international agencies — and, in turn, the world’s governments — to
start measuring progress through a dashboard with a dozen or so dials,
moving the focus away from G.D.P. and onto other aspects of the economy,
society and environment.

When I spoke with Enrico Giovannini, the head of Italy’s national
statistics agency, he said, “The good news, I think, is that at the
international level there are signs that something is changing.”
Giovannini then ticked off a list of a half-dozen countries — including
Germany, the United Kingdom and France — where top officials have
aligned themselves with an expanded focus on “well-being” rather than
growth as a measure of progress. At the same time, he noted, the Human
Development Index is planning its own revision later this year, a
project with which Giovannini is involved. And the H.D.I. planners,
Giovannini said, were considering other progress indicators that have
been recommended by the Stiglitz commission.

As for the effects of such changes, Stiglitz told me, “What we measure
affects what we do, and better measurement will lead to better
decisions, or at least different decisions.” But until the developed
nations of the world actually move beyond G.D.P. — a big if — this
remains a reasoned hypothesis only. A lingering question is whether some
government officials, perceiving dangers in a new measurement system,
might conclude that such an overhaul would wreak political havoc and
therefore ought to be avoided. A heightened focus on environmental
indicators, for starters, could give environmental legislation a far
greater urgency. And a revision of economic measures presents other
potential policy complications.

It has long been the case, for example, that the G.D.P. of the United
States outpaces that of European countries with higher taxes and greater
government spending; it has thus seemed reasonable to view our economic
growth as a vindication of a national emphasis on free markets and
entrepreneurship. But things look different if you see the measure
itself as flawed or inadequate. We take shorter vacations than
Europeans, for instance, which is one reason their G.D.P. is lower than
ours — but that could change if our indicators start putting a value on
leisure time. Some of the disparity, meanwhile, between the U.S. and
various European countries, Stiglitz argued, is a statistical bias
resulting from the way G.D.P. formulas account for public-sector
benefits. In other words, the services received from the government in a
country like Sweden — in public education, health care and child care,
among other things — are likely undervalued. Rejiggering the measures of
prosperity would almost certainly challenge our self-perceptions,
Stiglitz said, perhaps so much so that in the U.S. we might begin to
ask, Is our system working as well for most people as we think it has been?

State of the USA has its own political hurdles to overcome: until
Congressional leaders appoint a bipartisan commission for the
administration of the Key National Indicators System (something they’re
required to do promptly, according to the new health care legislation
but had not done by early May), the indicators system, and to some
extent State of the USA, are in limbo. All the same, a huge system of
measurement like State of the USA may be more politically palatable to
America’s elected officials than the smaller dashboard envisioned by the
Stiglitz commission. For one thing, it makes the definition of progress
more diffuse. If hundreds of measures — economic, environmental,
educational and the like — are thrown into the mix, users can pick and
choose their markers of progress. And argue about them. Now, this might
push us into a situation akin to what Simon Kuznets found himself in
when he was formulating ways to measure the national economy —
confronting all sorts of data but no real coherence. But that’s not how
Hoenig — or Stiglitz, for that matter — sees it. “The whole idea here,
in how it relates to Stiglitz’s report, is that this is a dashboard,
with real data, that’s going to be live, now, on real issues,” Hoenig
told me. His view is that the project will make the U.S. the first
country in the world whose population enjoys what he called “a shared,
quantitative frame of reference.” The size of the indicators panel is
not a stumbling block; if anything, he argued, it’s an asset for an
information-based society. The G.D.P. and other indexes, Hoenig said,
are “an artifact of a world before the Web.” For his part, Stiglitz sees
the State of the USA as a complement to any future dashboard system. A
small dashboard of indicators could be useful for some purposes, a large
panel for others. “When you go to a good doctor today, they don’t just
look at one or two vital signs,” he said. “They look at a hundred
statistics.” State of the USA, he told me, could be a “rich diagnostic
tool” for evaluating the health of the country.

It’s worth noting, in any event, that despite its size, State of the USA
is not kludgy. When Hoenig showed me the site recently — most of it
remains password-protected until its anticipated summer unveiling — it
was simple, with a click of a tab, to see how the U.S. measured up in
various ways, from health-insurance coverage to obesity, on a
state-by-state basis. It was fairly evident that the site could actually
fulfill one of the legislative demands of the national-indicators
system, which is to allow Americans to track how (or whether) our new
health care legislation changes our health care costs and perhaps our
health. It was likewise possible to imagine that if new measures of
happiness, say, or environmental sustainability eventually pass
statistical muster, they, too, could find places as State of the USA

Clicking around his site with me, Hoenig paused to say: “Right now, we
actually don’t know where this country is going. But this is an
opportunity to grasp that.” And then he kept on clicking.

Jon Gertner, a contributing writer, last wrote for the magazine about
calorie restriction.

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