One metric to rule them all 🧮

The welfare of a nation can... scarcely be inferred from a measure of national income.

^{— Simon Kuznets, economist}

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For nearly eighty years, Gross Domestic Product (GDP) has reigned as arbiter of national success, proxy for human progress. But it hardly tells the whole story. The economy can grow in the aggregate while life gets harder.

In Britain, the Office for National Statistics (ONS) released its updated Measures of National Wellbeing dashboard, which revealed that nearly one-in-four British adults report finding it fairly or very difficult to get by, while healthy life expectancy continues a worrying downward trend.

GDP is designed to count widgets rolling off an assembly line. It struggles with the contemporary information economy. For the average citizen, the phantom growth driven by massive capital investments in technology does not lower rent or increase wages.

Creative destruction

Indigenous frameworks, such as the Haudenosaunee Seven Generations principle or the Andean concept of Sumak Kawsay (good living), evaluated society based on the preservation of natural capital. During the Islamic Golden Age, economic health was judged by how wealth circulated through public endowments to eradicate poverty.

Before the 1930s, modern nation states were largely in the dark when it came to the shape and size of their economies. During the Great Depression, policymakers had no real way to measure just how bad the collapse was.

In 1932, US Congress commissioned economist Simon Kuznets to develop a way to measure what the nation produced. Kuznets created a metric he called National Income. Aware of its limitations, in his very first report to Congress in 1934, he warned against using it as a shorthand for societal wellbeing. Kuznets’s formula tracked market transactions but could not distinguish between different human activities, good, bad, or neutral. 

GDP DOB 12 04 1941  

A few years later, Britain was giving Hitler everything it had. To assist the war effort, legendary economist John Maynard Keynes realised the nation needed to know how much it could manufacture without sparking hyperinflation. Keynes refined Kuznets’ concepts into a framework that measured total production capacity, most notably by including government expenditure. GDP was born.  

When the Allies met at Bretton Woods in 1944 to outline their vision for the post-war financial architecture, delegates adopted GNP (Gross National Product) as the standard, which calculates the output of a nation’s citizens anywhere in the world. It wasn't until the late 1980s and early 1990s that the US and international institutions officially swapped over to GDP.

Boom and boon

Economic textbooks define GDP as: C + I + G + (X - M). Every variable in the equation represents a transaction. C represents consumer spending, I is business investment, G is government expenditure, and (X - M) represents net exports. If money does not change hands, it does not exist. 

GDP does not record the loss of biodiversity or the degradation of a coastline. Instead, the billions spent on cleanup and legal fees are logged as an economic W. If a parent cuts their hours to raise their toddler, GDP registers a negative (lower wages). But if that same family places their child in a nursery costing £1,500 a month and moves their elderly relative into a private care facility, the economy grows.

RIP GDP

A growing number of institutions and states are working to dethrone GDP. The United Nations High-Level Expert Group’s report, Counting What Counts, is a plug-and-play dashboard consisting of 31 distinct indicators.

This framework frames economic activity alongside three other pillars: wellbeing, equity and inclusion, and sustainability. And because nearly half of these indicators are drawn from existing frameworks, governments can adopt this dashboard immediately.

New Zealand has used its Wellbeing Budget framework since 2019. Government departments must outline how their proposals will improve life across specific categories, such as reducing child poverty or supporting mental health services.

Similarly, Bhutan has spent decades refining its Gross National Happiness (GNH) index, a legal framework that balances material development with psychological well-being, cultural preservation, and ecological resilience.

Dash bored

At a regional level, there is the Genuine Progress Indicator (GPI). When economists calculate a region's GPI, they take traditional GDP data but apply a series of corrections. They add estimated monetary values for positive, non-market actions like parenting, caregiving, and community organising. Then, they deduct real-world costs, such as rising income inequality, long commutes, and environmental damage. 

The result is often sobering. In many Western nations, while the GDP curve has climbed steadily upward for decades, the GPI curve has remained flat or gone backward since the late 1970s.

Treadmill up the pyramid

Growth, by its very nature, is transient. But our economic OS runs on an hedonic treadmill. Humans always adapt to new baselines of wealth and comfort. 

In 1974, economist Richard Easterlin identified what is known as the Easterlin Paradox. While wealthier individuals in a country are generally happier than poorer ones, a nation’s average self-reported happiness plateaus once basic material needs are met. Think secure housing, healthcare, nutrition. No matter how high GDP climbs past that line, satisfaction stalls.

And we require a 2% to 3% increase in GDP every year to keep our debt-laden system and public services from collapsing. Growth is now a permanent state of mind. This can lead to uneconomic growth, coined by ecological economist Herman Daly, which occurs when the hidden costs of hyper production outweigh the benefits. 

Degrowth 

Green growth technocrats argue we can unlink GDP from environmental harm through clean tech, and software and machine learning models that minimise the carbon footprint of industry without reducing output.

In the other corner, degrowth post-capitalists argue rich nations are incapable of decoupling GDP from their material footprint. This camp believes 21st century prosperity means liberating ourselves from the compulsion to grow at all, deliberately scaling down destructive industries while scaling up public goods, health, and leisure to create a stable, balanced economy.

In the ring

British economist Kate Raworth’s model of doughnut economics sees the economy as a circle bounded by two frontiers. The inner ring represents a social foundation of housing, education, healthcare, and political enfranchisement. The outer ring represents an ecological ceiling that humanity cannot overshoot without triggering collapse.

The goal of a modern economy, Raworth argues, is to steer society into the safe, equitable space of the doughnut. It’s a framework that treats the economy as a balanced homeostatic system rather than an extractive growth engine, which has already been adopted by city governments from Amsterdam to Portland to Melbourne.

Fine and dandy

This obsession with an upward curve leans on the secular Enlightenment myth that history is one-way, moving from primitive scarcity towards a destination of total material abundance. But the real world does not work this way.  

When leaders say the economy is performing beautifully, yet the lived experience is one of public service decline and a cost-of-living squeeze, trust vaporises. The resulting disillusionment is no bueno for democracies. 

Our 21st century economies require 21st century metrics, which will allow us to outline an economy designed around human life, rather than the other way round.