Our Perspectives

June 13 2014

Measuring human progress in the 21st Century

Workers at the at Santo Nino dumpsite in Tacloban, Philippines, six months after Haiyan. Photo: Lesley Wright/UNDP Philippines

Few, if any, statistical constructs have had a greater influence on the modern world than Gross Domestic Product (GDP). And 2014 marks the eightieth anniversary of its creation. As every economist knows, GDP summarizes total economic activity. It was developed by Simon Kuznets, a Russian-American economist and statistician, as a way to better understand the American economy during the great depression. Not only was Kuznets a brilliant economist (he went on to win the Nobel Prize in 1971), he was also an astute judge of humanity, or at least the potential for people to misuse numbers: when he introduced GDP to the US Congress he warned specifically against using it as a measure of wellbeing: “the welfare of a nation can”, he wrote, “scarcely be inferred from a measurement of national income”. And this is because, as hopefully every economist also knows, it is easy to construct examples of undesirable social or environmental phenomena (crime sprees, oil slicks or hurricanes for instance) that can generate both an increase in GDP and a decrease in wellbeing. But despite Kuznets’s warnings, in both the US and many other countries, the pursuit of economic growth and a rising GDP quickly became a dominant mantra … Read more