Alternative Indicators in Government Decision-Making

Valuing and accounting for natural and social capital to be given at least equal weight to Gross Domestic Product (GDP) in government decision-making with the use of alternative indicators.

For over half a century governments have allowed a single indicator, Gross Domestic Product (GDP) to assume total dominance as the key measure of a nation’s progress. Yet, GDP was not designed to be such a comprehensive measure of economic prosperity, let alone a measure of societal progress. GDP is the sum of national spending with no distinctions between transactions that add to well-being, or those that diminish it. In effect, GDP assumes that all monetary transactions, when combined as ‘growth,’ equate to a positive stimulus in our socio-economic progression.

As far back as 1934 GDP’s chief architect the economist Simon Kuznets warned that “The welfare of a nation can scarcely be inferred from a measurement of national income“. Ultimately, GDP irrefutably fails to measure sustainability, justice, social cohesion, healthy environments and happiness. So how has GDP become the predominant metric by which socio-economic progress is almost universally measured against?

Using a broader range of indicators will ensure the integration of a wider set of policy objectives in the pursuit of a fairer, more sustainable and dignified future. ‘Alternative indicators’ have already been developed to enable a far more holistic measurement and understanding of our progression.

Whether these alternative indicators take the form of subjective well-being indicators or a composite measure of the use of natural resources, when they are used alongside economic data they can bring the issues of equality, sustainability and genuine well-being to the forefront of policy-making. Using such metrics can serve as a framework for decision-making in policy that takes into account future generations.

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