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Article Cover FinGyaan of the Story Month
&access to education. The only problem here
is most of these figures are based on survey
methodologies and not on quantifiable data
which makes it unsuitable for designing
macroeconomic policies around it.
While Australian model incorporates indicators
like health, education, environment, crime
and social attachment, it is actually used in a
developed nation where growth is not a priority
as per capita income is high and demand is
slowing down. There is also OECD’s System of
Economic Environmental Accounts (SEEA) but
this is also used in addition to GDP and not as
an alternative. The most important alternative
that has emerged in recent years is the genuine
progress indicator. Comparatively GDP and GPI
are like gross profit and net profit. GPI was
developed by Centre for Sustainable Economy
and the Institute for Policy Studies in America.
Such kind of method would tell if we are enjoying
the benefits of economic growth (higher GDP) at
the cost of eating up tomorrow’s resources and
that GDP is not sufficient for this and hence it
needs to be modified or replaced.
Criticism for GDP:
Diane Coyle in her book ‘GDP: A Brief but
Affectionate History’ in which she has studied
GDP from 1940 and analysed in depth its
strengths and weaknesses and how it influences
politics. She concludes from her book that GDP
is a good measure for 20th century and not
for 21st century. The author’s main contention
is that it doesn’t judge anything apart from
economic output. Michael Green another critic,
who has launched his own Social Progressive
Figure 1: World GDP Change (YoY %)
Index at the Skoll World Forum 2013. The Social
Progressive Index is in different context than
what the author sees as a replacement for
GDP to measure growth. So the criticism cited
by Michael Green seems misconstrued and
misinterpreted. Some of the other critics include
Jaret Woodard, a partner at BCG, argued that a
sustainable economy and not a growth oriented
NOVEMBER 2014