The financial crisis highlighted the shortcomings of traditional measures of a country’s prosperity; here we examine the shift from GDP to multidimensional wellbeing indices
The Stiglitz-Sen-Fitoussi Commission played a pivotal role, as it emphasised the significance of comprehensive assessments beyond simple economic transactions. It rekindled interest in including additional indicators such as environmental sustainability, social equality, health, and total well-being.
Reassessing how policies are constructed
This shift in perspective reflected a better awareness of actual progress and prompted a reconsideration of how policies are constructed, and societal goals are set. It emphasised that true progress requires a multidimensional assessment of wellbeing that includes more than just economic activities.
GDP has long been used to assess economic health, but its limitations are well known
Distinguished economists such as Marshall and Hayek and GDP’s creator, Simon Kuznets, have criticised its narrow scope. While GDP is a valuable economic indicator, it only provides a snapshot of economic transactions, ignoring critical factors such as environmental impact, social welfare, and personal well-being. This insight is central to the ‘Beyond GDP’ initiative, which advocates for a broader view of national progress and a shift away from solely counting economic transactions to broader measures reflecting quality of life.
The changes that technology brings
The introduction of new technologies has brought new data and novel estimation methods, resulting in the development of several new indices that address the limitations of GDP. For example, the United Nations Human Development Index (HDI) and the OECD’s Better Life Index provide a more nuanced perspective than GDP by incorporating life expectancy, education, income, and life satisfaction data to encompass social and individual wellbeing. This shift reflects a growing recognition of the importance of gaining a more comprehensive understanding of economic performance and social progress.
The Citizen Prosperity Index puts the Institute for Global Prosperity at University College London (UCL) at the forefront of this data-driven evolution. It is redefining prosperity by expanding it beyond the narrow limits of traditional economic indicators to include data that reflect real-world community experiences and aspirations.
The Citizen Prosperity Index measures prosperity across multiple dimensions, such as income and job stability, social relationships, housing, environmental quality, and health. This tool makes a strong case for more inclusive and detailed policymaking based on thorough data analysis.
“Towards an Integrated Science of Wellbeing”
Fuelled by data, this expanded view of wellbeing and prosperity is also the focus of the new book “Towards an Integrated Science of Wellbeing,” edited by Prof Elizabeth Rieger and Prof Paul Dugdale, alongside Prof Robert Costanza and Dr Ida Kubiszewski who both work at the UCL Institute for Global Prosperity (IGP).
The book combines interdisciplinary research by leading experts to highlight the importance of diverse data in improving societal wellbeing. It challenges traditional economic-centric viewpoints and emphasises the significance of data-rich frameworks in assessing wellbeing.
The beyond GDP agenda
The ‘Beyond GDP’ agenda marked a revolution in measuring social progress. Instruments such as the IGP’s Citizen Prosperity Index and findings from “Towards an Integrated Science of Wellbeing” are paving the way in this direction. They emphasise the importance of creating tools that capture the different components of lived experiences and designing policies informed by such measures.
Adopting a more inclusive approach to measuring prosperity is critical in this data-driven journey. It ensures that policies and practises are deeply informed and aligned with life’s complex realities rather than superficial assessments. The way for a more inclusive and prosperous future should be paved by prioritising comprehensive, multi-faceted data – a future in which every data point tells a part of our collective story.
The UCL Institute for Global Prosperity
The UCL Institute for Global Prosperity aims to redesign prosperity for the 21st century. Through its pioneering research and three innovative master’s degrees, we seek to equip leaders with the skills to change the way we conceive and run our economies, in order to build a prosperous, sustainable, global future, underpinned by the principles of fairness and justice.
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This piece was written and provided by Nikolaos Tzivanakis (Senior Research Fellow, UCL Institute for Global Prosperity)
