Calgary has just endured a flood ‘of the century’ which has been estimated at a cost of almost $2 billion. While the damages will halt Calgary’s economic activity temporarily, ironically Alberta’s GDP will actually increase significantly as the costs of the clean up and repair of damaged homes and public infrastructure are counted as a ‘plus’ in Alberta’s provincial income accounts.
At the same time, the hours of volunteer time devoted to helping neighbours drain their flooded basements and cleaning up the mess won’t count in the GDP as no money has changed hands in the market.
None of this makes any common sense.
GDP is a poor measure of progress, as it makes no distinction between expenditures in the economy that contribute to genuine wellbeing and those which damage wellbeing and erode happiness.
As Robert Kennedy once noted in 1968, "the Gross National Product measures everything (when money changes hands in the market) except the things that make life worthwhile."
We need a new system of measuring our progress that actually aligns with what we all desire: wellbeing and happy lives.
For 15 years I have been working on alternative measures of progress, including the Genuine Progress Indicator (GPI). The GPI makes adjustments to the GDP for social and environmental costs, such as car crashes, oil spills, unsustainable resource use, income inequality, while adding the value of volunteer time.
In May of 2012 three other colleagues I formed a cooperative business consultancy called Genuine Wealth.
Our mission is to help individuals, businesses and communities mature into flourishing economies of wellbeing by adopting a new model for measuring progress I call Genuine Wealth.
Our model is based on the rediscovering the true meaning of the word ‘wealth’, which comes from the 13th century Old English word meaning ‘the conditions of well-being.’
The Genuine Wealth model helps businesses, communities and nations measure the conditions of their human and social/cultural assets, their natural assets, and their built and financial assets. The goal is to optimize wellbeing and ensure that the enterprise or community is flourishing.
I believe that profit and GDP maximization will be replaced by what a Wellbeing Index and ‘Wellbeing Returns on Investment’ measures.
Simon Küznets, one of the key architects of the national income accounting system, noted that “national income concepts will have to be either modified or partly abandoned, in favour of more inclusive measures, less dependent on the appraisals of the market system.”
British economist and one of the architects of the GDP, John Maynard Keynes, envisioned a future beyond GDP and national income accounts. Near the end of his life he noted:
“The day is not far off when the economic problem will take the back seat where it belongs, and the arena of the heart and the head will be occupied or reoccupied, by our real problems -- the problems of life and of human relations, of creation and behavior and religion.”
It’s time for a new economic paradigm and measurement system that is based on wellbeing and ultimately genuine happiness. After all, the word happiness means ‘wellbeing of spirit’ from the Greek eudaimonia.
