The New Reality in Judging Success

French President Nicholas Sarkozy recently asked some very smart folks, including Joseph Stiglitz, to reassess how we should be gauging posperity. The traditional measure, growth in GDP, simply does not seem to hack it any more. At least that is what Stiglitz and the others concluded. They did not necessarily agree on the new roadmap or exactly what the new guage would be, they just agreed the old gauge is highly flawed.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aCcM_7rg22Bw

http://www.nytimes.com/2009/09/23/business/economy/23gdp.html?_r=1

Among the problems with a single-minded focus on GDP are:

• It can be built on a debt bubble and, as we are now seeing, this is not a good thing http://www.nakedcapitalism.com/2009/09/its-the-debt-stupid.html;
• It ignores environmental degradation and other quality of life issues that might potentially weigh on GDP growth;
• It ignores economic inequality in that we don't care where the GDP comes from or whether it is benefitting everyone;
• It ignores jobless rates;
• It ignores health care; and
• It ignores many of the things that tend to make us happy.

So what is the answer. Stiglitz and company did not say. Some, however, think the Danish might have the answer - taxes!

Yes, them Danes have one of the highest tax rates in the world, yet by pretty much all measuring sticks it is a highly prosperous country and a great place to live. I am not saying I would increase taxes tomorrow to 49% and make everyone happy, but certainly what the Danes are doing is worth some logical analysis. At least the country, taxes aside, seems to be focusing on some of the quality of life aspects to living that GDP growth ignores - or perhaps we just all feel we will feel better if we only have more to spend (based on debt or otherwise).

http://suddendebt.blogspot.com/2009/09/more-taxes-enyone.html

I don't have the answer, but I agree the single-minded focus on GDP is not it.

Disclosures: None