http://online.wsj.com/article/SB125292171178308237.html Nicolas Sarkozy was elected president two years ago on a pledge to boost France’s economic prosperity. Now he is suggesting a different way to measure that prosperity – one that includes factors such as vacation time, health care and family relationships. From now on, to gauge the economy’s health, France will consider well-being in addition to the classic measure of gross domestic product, Mr. Sarkozy said Monday in a speech at the Sorbonne, part of the University of Paris. In the speech presenting the findings of a committee headed by Nobel Prize-winning economist Joseph Stiglitz, the president said new measures are needed in the wake of the financial crisis, which was triggered by an overreliance on free-market principles. “If the market was the solution to all problems and was never wrong, then why are we in such a situation?” asked Mr. Sarkozy. “We need to change criteria.” The so-called Stiglitz commission has been working at the French president’s behest for 18 months on recommendations for measuring well-being. In its report, the group – which includes 1998 Nobel laureate Amartya Sen among its two dozen members – said tracking household income and consumption would provide a better indication of living standards than GDP. In the longer term, the panel said, governments must pay more attention to sustainability to determine what level of well-being can be maintained for future generations. More • Real Time Economics: Sarkozy, Stiglitz on Measuring Progress Mr. Sarkozy isn’t the first politician to criticize GDP, which measures a country’s aggregate output, as the dominant yardstick of economic performance. In 1968, Robert Kennedy complained during his U.S. presidential campaign that GDP “counts napalm and counts nuclear warheads.” Since then, many economists have said GDP isn’t a fully adequate way to measure growth, but no one has come up with a viable alternative. Many of Mr. Sarkozy’s domestic policies have focused on fueling output. He has chipped away at France’s 35-hour workweek, encouraging employees to work overtime to boost production. He cut income taxes for high earners, and his administration launched a “cash for clunkers” program to help jump-start the French auto-making industry. Still, Mr. Sarkozy’s efforts, like those of other world leaders, have been thwarted by the global downturn. France’s GDP is expected to shrink 3% this year. Taking into account well-being would likely paint a rosier picture of the economy in France, where workers take long vacations and have generous social-security benefits. Healthy and Wealthy Nicolas Sarkozy is suggesting gauges of economic health encompass well-being in addition to GDP. Measures could include: • Employment levels • Health care • Vacation • Household assets and income • Consumption • Education Mr. Sarkozy said he would urge other world leaders, many of whom are gathering at the Group of 20 meeting in Pittsburgh toward the end of the month, to take up the commission’s recommendations and adopt new indicators too. “What we measure affects what we do,” said Mr. Stiglitz, who also spoke at the Sorbonne. “If we have the wrong measures, we will strive for the wrong things.” The commission didn’t propose a single composite indicator to replace GDP. Instead, it suggested that each country design its own basket of indicators, including such factors as unemployment, insecurity or inequality. France’s statistical institute, Insee, said it will work on providing some of the data recommended by the Stiglitz panel, in particular to better evaluate household assets. The Organization for Economic Cooperation and Development, the Paris-based club of 30 industrialized nations, said it was ready to help implement the panel’s recommendations.
SACRE BLEU!
I don’t know about economic well being, but he’s got a point for general well being. i’d love to get some french-like (or italian-like) vacation time. “If we have the wrong measures, we will strive for the wrong things.” ^ Highly agree You’ve got to be sure that incentives are set up properly to help you achieve your goals. If I had to pick one thing that that instigated this crisis, it would be inadequate incentive system… even more so than risk management. If we had a more balanced incentive system (not based solely on increases to short term profits/earnings), there would have been a more natural tendency to take risk management seriously. Until we address that issue, we’re still “at risk” for ending up exactly where we started again. -end rant- effort to save time: [insert jtld anti-quality of life comment… blah blah blah, i’m rich blah blah i have lots of vacation time blah blah blah troll blah blah call someone a racist blah blah]
Blue sugar? 
Meh That’s similar to solving high unemployment by redefining “Full Employment”
There’s something to be said for this argument. GNP was originally measured to gauge a country’s military capacity because it supposedly measured its the economic capacity to support and maintain its armed forces. Once the data became available, it turned out to be very useful for managing economic policy, and GDP began to supplant GNP for that use. If you are managing the economy, how you measure it makes a difference. If your goal is simply to increase GDP, then continue using that. If you are trying to make people better off, then you should consider complementing GDP with other important measures. For example, let’s say that right now I mow my lawn and my neighbor mows his. Then I decide to pay my neighbor $1000 to mow my lawn for a year, and he pays me $1000 to mow his for a year. Each of us is no richer and no poorer than before, but GDP just went up by $2000. Moreover, if you bring the tax system into it, the government may want to tax us on our extra $1000 in income, so we are actually worse off than before, even though our net production is no different than before. In fact, Herman Daly pointed out that we can maximize GDP very nicely if we are all morbidly ill, divorced, living alone, and suing each other. But this is clearly not as desirable as a situation where we are healthy, happy with our lives, and living in peace with our neighbors and spouses.
“living in peace with our neighbors” ? Our economy is doing great! Bchadwick just hugged his next door neighbor! Our economic policies are working! There is nothing wrong with “living in peace with our neighbors,” but that stuff belongs in a standard of living index.
Looks like someone is bringing the “retarded” argument about quality of life. I’m with Buyicide on this one. GDP is not meant to measure happiness or standard of living, that being said, it is still a flawed measure of economic activity, like bchadwick says, we could hire all the unemployed to dig a huge hole and then all the underemployed to filled it up, but this would obviously won’t increase our wealth, but it would do wonders for our GDP.
nolabird032 Wrote: ------------------------------------------------------- effort to save time: [insert jtld anti-quality of life comment… blah blah blah, i’m rich blah blah i have lots of vacation time blah blah blah troll blah blah call someone a racist blah blah] +100, hahaha, not bad
but yes, i agree, quality of life and economic growth need different measurements. quality of life is the result of economic growth in a stable system. I think Stiglitz is trying to measure the Happiness Index which already exists. http://en.wikipedia.org/wiki/Gross_National_Happiness
bchadwick Wrote: ------------------------------------------------------- > Blue sugar? Sucre Bleu?
Zut, Zut, et Zut!
Agreed that raw economic activity is different than a quality of life index. Now, which one do you think elected officials ought to be concentrating on when they manage public policy?
bchadwick Wrote: ------------------------------------------------------- > Agreed that raw economic activity is different > than a quality of life index. Now, which one do > you think elected officials ought to be > concentrating on when they manage public policy? Too deep of a question for a forum. But, Considering that this joker supposedly promised to change the economy, I would say he should try to improve the economy rather than change the definition.
I don’t necessily think this measure is wrong or invalid. I think that the math and finance guys trying to maximize its value don’t understand what it is and how it was created as indicated above. They haven’t taken the time to actually look over the data they are manipulating. Like most indicators it is not a measure of economic growth but its change is used as a proxy for economic growth. In a normal functioning economy we can use it as an indicator of economic growth but when individuals and governments attempt to develop policies that are geared to only deal with the indicator itself then the changes they make have unintended consequenses. I think this is the case with many very intelligent finance people who lack experience and scope. JMHO