Improving GDP: Demolishing, Repointing or Extending?*

Joint 1st

Jonathan Haskel, Carol Corrado, Kevin Fox,
Peter Goodridge, Cecilia Jona-Lasinio, Dan Sichel and Stian Westlake

Abstract

Recent years have seen a proliferation of indices of economic achievement: from the worldwide Human Development Index; to the Measures of Australia’s Progress; to the EU Innovation Scoreboard. Unfortunately, none of them satisfy the principles of good measurement. That is, none of these indices have the desirable properties we would want from an index number, namely not double counting and having meaningful weights. GDP does. But economies have dramatically changed structure since the development of GDP: more knowledge production, more digital goods, more things for free. Should then we demolish the GDP edifice altogether? No. We propose repointing GDP in line with the transformation in economic structure: to measure intangible and environmental capital, to quality-adjust prices, to run online experiments on willingness-to-pay for free goods. We then propose extending GDP to measure economic well-being better: using some of the components of GDP such as consumption, along with leisure and measures of security. The newly developed measures will follow the principles of good economic measurement and reflect production and well-being in modern global economies.