Hostname: page-component-78c5997874-lj6df Total loading time: 0 Render date: 2024-11-05T10:32:54.892Z Has data issue: false hasContentIssue false
  • English
  • Français

Measuring Welfare Beyond GDP

Published online by Cambridge University Press:  01 January 2020

Andrew Aitken
Andrew Aitken*
Affiliation:
National Institute of Economic and Social Research; Economic Statistics Centre of Excellence (ESCoE)
*
E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Gross Domestic Product (GDP) is often treated as shorthand for national economic well-being, even though it was never intended to be; it is a measure of (some) of the marketable output of the economy. This paper reviews several developments in measuring welfare beyond GDP that were recently presented at the Economic Statistics Centre of Excellence (ESCoE) annual conference in May 2019. The papers discussed fall into three broad areas. First, a significant amount of work has focused on incorporating information about the distribution of income, consumption and wealth in the national accounts. Second, the effects of digitisation and the growth of the internet highlight the potential value in measuring time use as a measure of welfare. Third, the digital revolution has spawned many new, often ‘free’ goods, the welfare consequences of which are difficult to measure. Other areas, such as government services, are also difficult to measure. Measuring economic welfare properly matters because it affects the decisions made by government and society. GDP does a reasonable job of measuring the marketable output of the economy (which remains important for some policies), but it should be downgraded; more attention should be given to measures that reflect both objective and subjective measures of well-being, and measures that better reflect the heterogeneity of peoples' experiences.

Keywords

GDPwelfareinequalitytime usedigital economyeconomic measurementI31D31E01
Type
Research Articles
Information
National Institute Economic Review , Volume 249 , August 2019 , pp. R3 - R16
Copyright
Copyright © 2019 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The author thanks Martin Weale and Rebecca Riley for comments on the draft of this paper.

References

Aitken, A. and Oulton, N. (2019), ‘Estimating true cost-of-living (Konüs) price indices from household data’ (forthcoming).Google Scholar
Aitken, A. and Weale, M.R. (2018), ‘A democratic measure of household income growth: theory and application to the United Kingdom’, ESCoE Discussion Paper 2018–02.CrossRefGoogle Scholar
Aitken, A. and Weale, M.R. (2019), ‘A democratic measure of national income growth for the United Kingdom, 2006–2015’ (forthcoming).Google Scholar
Arrow, K.J. (1963), Social Choice and Individual Values, Second edition, New Haven and London: Yale University Press.Google Scholar
Alvaredo, F., Atkinson, A., Piketty, T., Saez, E and Zucman, G. (2017), The World Wealth and Income Database, http://www.wid.world, 2011–2017.Google Scholar
Atkinson, A.B. (1970), ‘On the measurement of inequality’, Journal of Economic Theory, 2(3), pp. 244–63.Google Scholar
Atkinson, A.B. (2005a), Atkinson Review: Final report. Measurement of Government Output and Productivity for the National Accounts, https://www.ons.gov.uk/ons/guide-method/method-quality/specific/public-sector-methodology/articles/atkinson-review-final-report.pdf.Google Scholar
Atkinson, A.B. (2005b), ‘Top incomes in the UK over the 20th century’, Journal of the Royal Statistical Society: Series A, 168, pp. 325–43.Google Scholar
Becker, G.S. (1965), ‘A theory of the allocation of time’, Economic Journal, 75, pp. 493–517.CrossRefGoogle Scholar
Brewer, M., Etheridge, B. and O'Dea, C. (2017), ‘Why are households that report the lowest incomes so well-off?, The Economic Journal, 127 (605), F1–631.CrossRefGoogle Scholar
Brynjolfsson, E., Collis, A., Diewert, W.E., Eggers, F. and Fox, K.J. (2019), ‘GDP-B: accounting for the value of new and free goods in the digital economy’, NBER Working Paper 25695, https://www.nber.org/papers/w25695.Google Scholar
Brynjolfsson, E., Eggers, F. and Gannamaneni, A. (2018), ‘Using massive online choice experiments to measure changes in well-being’, National Bureau of Economic Research working paper 24514, April.CrossRefGoogle Scholar
Cherchye, L., De Rock, B. and Vermeulen, F. (2012), ‘Married with children: a collective labor supply model with detailed time use and intrahousehold expenditures information’, American Economic Review, December, pp. 3377–405.CrossRefGoogle Scholar
Cowen, T. (2013), Average is Over, New York: Penguin.Google Scholar
Coyle, D. (2014), GDP: A Brief but Affectionate History, Princeton, NJ: Princeton University Press.Google Scholar
Coyle, D. and Benjamin Mitra-Kahn, B. (2017), ‘Making the future count’, Indigo Prize Winning Entry.Google Scholar
Coyle, D. and Nakamura, L. (2019), ‘Towards a framework for time use, welfare and household-centric economic measurement’, Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2019-01.CrossRefGoogle Scholar
Deaton, A. (2018), ‘What do self-reports of wellbeing say about life-cycle theory and policy’, NBER Working Paper 24369, March.CrossRefGoogle Scholar
Diewert, W.E., Fox, K.J. and Schreyer, P. (2018), ‘The digital economy, new products and household welfare’, Economic Statistics Centre of Excellence (ESCoE), Discussion Paper 2018–16.Google Scholar
Diewert, W.E., Fox, K.J. and Schreyer, P. (2019), ‘Experimental economics and the new commodities problem’, Discussion Paper 19-03, Vancouver School of Economics.Google Scholar
Fesseau, M. and Mattonetti, M. (2013), ‘Distributional measures across household groups in a national accounts framework: results from an experimental cross-country exercise on household income, consumption and saving’, OECD Statistics Working Papers, No. 2013/04, Paris, OECD Publishing, https://doi.org/10.17887/5k3wdjqr775f-en.CrossRefGoogle Scholar
Fixler, D.J., Gindelsky, M. and Johnson, D. (2019), ‘Improving the measure of the distribution of personal income’, US Bureau of Economic Analysis working paper.CrossRefGoogle Scholar
Fixler, D. and Johnson, D. (2014), ‘Accounting for the distribution of income in the US National Accounts’, in Jorgenson, D., Landefeld, J.S. and Schreyer, P. (eds), Measuring Economic Stability and Progress, Chicago: University of Chicago Press.Google Scholar
Fixler, D., Johnson, D., Furlong, K. and Craig, A. (2017), ‘A consistent data series to evaluate growth and inequality in the National Accounts’, Review of Income and Wealth, 63:S2, pp. S437–59.CrossRefGoogle Scholar
Fleurbaey, M. and Maniquet, F. (2011), A Theory of Fairness and Social Welfare, Cambridge and New York: Cambridge University Press.Google Scholar
Foxton, F., Grice, J., Heys, R. and Lewis, J. (2019), ‘The welfare implications of public goods: lessons from 10 years of Atkinson in the UK’, ESCoE Discussion Paper 2019-11, July.Google Scholar
Garbinti, B., Groupille-Lebret, J. and Piketty, T. (2018), ‘Income inequality in France, 1900–2014: evidence from distributional national accounts (DINA)’, WID.world Working Paper Series 20217/4, https://wid.world/document/b-garbinti-j-goupille-and-t-piketty-inequality-dynamics-in-france-1900-2014-evidence-from-distributional-national-accounts-2016/.CrossRefGoogle Scholar
Goolsbee, A. and Klenow, P.J. (2006), ‘Valuing consumer products by the time spent using them: an application to the internet’, American Economic Review, May, pp. 108–12.CrossRefGoogle Scholar
Heys, R. (2019), ‘Bridging the gap between GDP and welfare’, paper given at ESCoE Conference, King's College London, 8 May.Google Scholar
Hicks, J.R. (1940), ‘The valuation of the social income’, Economica, 7, pp. 105–24.CrossRefGoogle Scholar
HM Treasury (1941), An Analysis of the Sources of War Finance and an Estimate of the National Income and Expenditure in 1938 and 1940, available online at https://www.escoe.ac.uk/wp-content/uploads/2019/05/Treasury-National-Income-Expenditure-1938-1950.pdf.Google Scholar
Horlings, E. and Smits, J.-P. (2019), ‘Measuring well-being and sustainability in the Netherlands: the first monitor of well-being’, paper given at ESCoE Conference, King's College London, 8 May.Google Scholar
Jäntti, M., Sierminska, E.M. and Van Kerm, P. (2015), ‘Modeling the joint distribution of income and wealth’, in Measurement of Poverty, Deprivation, and Economic Mobility, pp. 301–27, Emerald Group Publishing Limited.Google Scholar
Johnson, D., Fisher, J., Smeeding, T. and Thompson, J. (2018), ‘Inequality in 3D: income, consumption, and wealth’, Washington Center for Equitable Growth, Working PaperCrossRefGoogle Scholar
Jones, C.I. and Klenow, P.J. (2016), ‘Beyond GDP? Welfare across countries and time’, American Economic Review, 106(9), pp. 2426–57.CrossRefGoogle Scholar
Jorgenson, D.W. (2018), ‘Production and welfare: progress in economic measurement’, Journal of Economic Literature, 56, 3, pp. 867–919.CrossRefGoogle Scholar
Jorgenson, D.W. and Schreyer, P. (2017), ‘Measuring individual economic well-being and social welfare within the framework of the system of national accounts’, Review of Income and Wealth, 63, Supplement 2, pp. S460–77.CrossRefGoogle Scholar
Kahneman, D. (1999), ‘Objective happiness’, in Kahneman, D., Diener, E. and Schwartz, N. (eds), Well-Being: The Foundations of Hedonic Psychology, New York: Russell Sage, pp. 3–25.Google Scholar
Konüs, A.A. (1939), ‘The problem of the true index of the cost of living’, Econometrica, 7 (1), pp. 10–29.CrossRefGoogle Scholar
Krueger, A.B., Kahneman, D., Schkade, D., Schwartz, N. and Stone, A.A. (2009), ‘National time accounting: the currency of life’, in Krueger, A.B. (ed.), Measuring the Subjective Well-Being of Nations, University of Chicago Press: Chicago, pp. 9–86.CrossRefGoogle Scholar
Kuznets, S. (1955), ‘Economic growth and income inequality’, American Economic Review, 45, 1, pp. 1–28.Google Scholar
New Zealand Treasury (2019), The Treasury Approach to the Living Standards Framework, February.Google Scholar
Nordhaus, W.D. and Tobin, J. (1972), ‘Is growth obsolete?’, in Economic Research: Retro-spect and Prospect, Volume 5: Economic Growth, pp. 1–80, New York: National Bureau of Economic Research.Google Scholar
ONS (2016), Household Satellite Accounts: 2005 to 2014.Google Scholar
Oulton, N. (2008), ‘Chain indices of the cost of living and the path-dependence problem: an empirical solution’, Journal of Econometrics, 144, 1 (May), pp. 306–24.CrossRefGoogle Scholar
Oulton, N. (2012), ‘How to measure living standards and productivity’, Review of Income and Wealth, 58, 3 (September), pp. 424–56.CrossRefGoogle Scholar
Payne, C.S. and Vassilev, G. (2019), ‘Invisible economics – valuing time-use to measure the modern economy’, paper given at the ESCoE Conference, King's College, London, 9 May.Google Scholar
Piketty, T. (2003), ‘Income inequality in France, 1901–1998’, Journal of Political Economy, III, pp. 1004–42.Google Scholar
Piketty, T. (2014), Capital in the Twenty-First Century, Cambridge, Mass.: Belknap Press of Harvard University Press (translated by Arthur Goldhammer).CrossRefGoogle ScholarPubMed
Piketty, T. and Saez, E. (2003), ‘Income inequality in the United States, 1913–1998’, Quarterly Journal of Economics, 118, pp. 1–39.CrossRefGoogle Scholar
Piketty, T., Saez, E. and Zucman, G. (2018), ‘Distributional National Accounts: methods and estimates for the United States’, Quarterly Journal of Economics, 133, 2, pp. 553–609.CrossRefGoogle Scholar
Pilling, D. (2018), The Growth Delusion The Wealth and Well-Being of Nations, Bloomsbury Publishing.Google Scholar
Ravallion, M. (2012), ‘Mashup indices of development’, World Bank Research Observer, 27 (I), pp. 1–32.Google Scholar
Sefton, J.A. and Weale, M.R. (2006), ‘The concept of income in a general equilibrium’, Review of Economic Studies, 73 (1), pp. 219–49.CrossRefGoogle Scholar
Sen, A.K. (1970), Collective Choice and Social Welfare, San Francisco, Calif.: Holden-Day.Google Scholar
Sen, A.K. (1985), Commodities and Capabilities, Amsterdam: North Holland.Google Scholar
Slesnick, D.T. (1998), ‘Empirical approaches to the measurement of welfare’, Journal of Economic Literature, 36, 4, pp. 2108–65.Google Scholar
Stiglitz, J., Fitoussi, J.-P. and Durand, M. (2018a), Beyond GDP: Measuring what Counts for Economic and Social Performance, OECD Publishing, Paris, https://doi.org/10.1787/9789264307292-en.CrossRefGoogle Scholar
Stiglitz, J., Fitoussi, J.-P. and Durand, M. (eds) (2018b), For Good Measure: Advancing Research on Well-Being Metrics Beyond GDP, OECD Publishing, Paris, https://doi.org/10.1787/9789264307278-en.Google Scholar
Stiglitz, J., Sen, A. and Fitoussi, J. (2009), Report by the Commission on the Measurement of Economic Performance and Social Progress, S.l: [s.n.]. [Also published as Mismeasuring Our Lives: Why GDP Doesn't Add Up, New York: The New Press.]Google Scholar
Stone, R. (1984), ‘The accounts of society, Nobel Memorial Lecture’, 8 December, available at: https://www.nobelprize.org/uploads/2018/06/stone-lecture.pdf.Google Scholar
Tonkin, R. (2015), The Distribution of Household Income, Consumption and Savings: an OECD Study, Technical Report, ONS.Google Scholar
Waltl, S.R. (2019), ‘Multidimensional wealth inequality: a hybrid approach toward distributional national accounts in Europe’, paper given at ESCoE Conference on Economic Measurement.Google Scholar
Waring, M. (1988), Counting for Nothing: What Men Value and What Women are Worth, Wellington: Allen & Unwin/Port Nicholson Press.CrossRefGoogle Scholar
Weitzman, M.L. (1976), ‘On the welfare significance of national product in a dynamic economy’, Quarterly Journal of Economics, 90 (1), pp. 156–62.CrossRefGoogle Scholar
Zwijnenburg et al. (2017), ‘Unequal distributions’, OECD, http://wid.world/wp-content/uploads/2017/11/054-DNA_OECD.pdf.Google Scholar