Looking beyond the traditional concept of economic growth: alternative meanings and measures of nations’ economic and social progress

Abstract

This paper gives some arguments for the need to redefine economic progress or to shift beyond Gross Domestic Product (GDP) as an indicator of economic growth and development of nations. The novel alternative measures of progress and well-being (e.g. Human Development Index, Legatum Prosperity Index, Genuine Progress Indicator, Measure of Domestic Progress, Green Gross Domestic Product, Index of Sustainable Economic Welfare, Gross National Happiness Index, Happy Planet Index, Environmental Performance Index) are presented and discussed. As opposed to GDP, which emphasizes economic quantity only, such new indicators evaluate what truly matters to people (i.e. the quality of life) and what matters to the planet (i.e. resource depletion). They also promote sustainable development. The study provides some empirical illustrations of the selected measures using international data drawn from the literature and statistical databases (e.g. World Database of Happiness, The new economics foundation’s database, the UNDP HDI database, Yale University and Columbia University and Legatum Institute). The paper concludes, among other things, that economists generally agree: the way economic and social progress is measured should evolve over time. However, there is lack of consensus on whether the GDP-based system should be improved upon, replaced by other approaches, or complemented by other indicators. When considering various indexes on economic well-being, numerous methodological and political issues could be addressed. Keywords: economic growth and development, nation well-being, happiness economics