SPU Response: economy on life support  The French have come up with some dangerously good ideas. 

There’s a revolutionary spirit at work in the newest policy recommendations to come out of the report commissioned by President Sarkozy.  As the G-20 convened last week, Sarkozy arrived with the report of the French Commission on the Measurement of Economic Performance and Social Progress, which was headed up by the Nobel-prize laureates Joseph Stiglitz and Amartya Sen.

The report is based on the kind of common sense that led Stiglitz to his Nobel-winning insights: “What you measure affects what you do…If you don’t measure the right thing, you don’t do the right thing.”[1]  Given the disastrous proportions of the Great Recession, you might wonder, along with Stiglitz, whether we are measuring the right things when it comes to economic policy.  The US and the whole G-20 seem to be focused on one measurement in particular– GDP.

 The problem with GDP, as the Commission asserts boldly, is that GDP doesn’t actually measure what people care most about–  “quality of life”.  GDP is a one-dimensional scale of financial activity that contains no direct measures of health, wholeness, happiness, or the well-being of families and communities.  Not only does GDP fail to address these issues of life quality and happiness, but it also fails to account for the “externalities” of economic activity: for example, pollution, stress and waste.  When someone gets sick in the US, for example, GDP typically goes up, due to the cost of treating illness, even though the event of illness is a clear negative for that person and their community.  In light of all these short-comings, Stiglitz sums up the report as a call to abandon “GDP fetishism.”[2]

 It’s not easy to measure the subjective, intangible aspects of personal and communal health and life quality, of course, and the Commission hasn’t made much progress in solving that problem.  Still, that’s no excuse to give up on the task.  The business schools where I’ve studied and taught, Stanford and Seattle Pacific University, both make the same claim in their branding statements: “Change the World”. Changing our focus on economic measurement, from pure unadulterated economic power, to an enhanced metric of power and life quality, might help lead to a better tool for changing the world.


[1] Stiglitz quoted in the NY Times article by Peter S. Goodman, 23 September 2009.

[2] Economist, 19 September 2009, p. 88.


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