A man is murdered, a woman beaten and raped, a child horribly abused, a business robbed, a home terrifyingly invaded. None of these things will reduce national GDP by one jot. A booming economy can accompany a society where increasing crime makes life hideous. Which would you prefer – 50% reduction in crime or 50% increase in national GDP? Older people might opt for the reduction in crime, younger people for the increase in GDP. In either case, the question raises the issue of how should success in a nation be measured.
GDP is just the value of all goods and services produced in a country in a year. It was originally introduced in the USA in the Great Depression as a way of measuring how much and how quickly the US economy was shrinking. But somehow GDP has become a surrogate for wellbeing, something it was never designed to be. The Nobel Laureate, Simon Kuznets, who devised this famous indicator, himself recognized that “the welfare of a nation can scarcely be inferred from a measurement of national income as defined by the GDP.” But that is ….