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The Misty Grail: The Search for a Comprehensive Measure of Development and the Reasons for GDP Primacy

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  • Emanuele Felice

Abstract

type="main"> Recent decades have seen a flurry of new indicators to measure economic progress, but none of them has succeeded in replacing GDP. This article seeks to explain this outcome and to contribute to the debate about composite indicators versus a dashboard approach. To this end, it reviews some of the most popular alternatives to GDP (the Human Development Index, the Genuine Progress Indicator, the Happy Planet Index, and an environmentally corrected GDP), focusing on their conceptual foundations rather than on their statistical consistency as most of the literature does. It is shown that most of these measures are theoretically inconsistent; the exception is the environmentally corrected GDP, but since this too has failed to replace GDP, inconsistency must be only one reason behind the limited use of alternative measures. The author argues that the main reason for GDP's primacy is that GDP is better suited to reflect the goals of capitalist market economies. This implies that constructing composite indicators as alternatives to GDP will be pointless as long as the current preference system has not changed to include environmental or social goals. The author also suggests that for this purpose a dashboard approach, which provides different social groups with intelligible quantitative instruments, may be preferable to the use of composite indicators.

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  • Emanuele Felice, 2016. "The Misty Grail: The Search for a Comprehensive Measure of Development and the Reasons for GDP Primacy," Development and Change, International Institute of Social Studies, vol. 47(5), pages 967-994, September.
    • Handle: RePEc:bla:devchg:v:47:y:2016:i:5:p:967-994
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    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • I00 - Health, Education, and Welfare - - General - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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