William Paul Bell Queensland University Researcher

Why is mainstream economics not a social science but ideological mathematics?

GDP as a proxy for well being misses the mark

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The report prepared for the President of France, Nicolas Sarkozy, by two Nobel prize-winning economists, Joseph Stiglitz and Amartya Sen, has proposed ways of improving our measurement of economic performance and social progress (Gittens 2009).  GDP measures the production of an economy.  There are at least three problems with GDP as a proxy for well-being.  First, this proxy may hold for countries outside the OECD membership, where the basics such as shelter, food, access to medical services, and clean water and sanitations are lacking.  Second, what is measured becomes a policy target, in this case a misguided target in OECD countries.  Third, GDP becoming a target circumvents the important discussion of what are suitable measures for well-being.  Equating the level of GDP to the level of well-being reduces the study of economics to an optimisation problem, allowing neoclassical economics the pretence of being scientific.  My post ‘The G8 protests and the logically inconsistent foundations of neoclassical economics’ further discusses this scientific pretence.
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“The unprecedented wealth that has accumulated in advanced societies during the past generation means that an increasing share of the population has grown up taking survival for granted. Thus, priorities have shifted from an overwhelming emphasis on economic and physical security toward an increasing emphasis on subjective well-being, self-expression and quality of life.” (Ronald Inglehart)

Measures of “subjective well-being, self-expression and quality of life” are complex, multidimensional and perhaps irreducible to a single scale.  In the future, GDP may play a much small part in the measure of well-being.

The following web article discusses further the failings of GDP as a measure.

Lies and Statistics: What Does Our Obsession with Gross Domestic Product Obscure? By Sam Pizzigati. Posted September 28, 2009.

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