Thursday, February 5, 2009

What We Measure Matters

The most important number to the powers that be is the GDP. The GDP is how Wall Street and the government measure the health of our economy but this number is seriously flawed for two important reasons.

First, it measures negative events as positive additions to GDP - Car accidents, divorces, and oil spills all add to the GDP.

Second, it fails to include or account for positive activities if money doesn't change hands - taking your neighbor to the doctor doesn't count while hiring a stranger to drive a cab does. Which do you think makes a better society?

As an accountant, I'm keenly aware that what we measure matters. In my MBA program, I really appreciated the work of Mark Anielski, an Adjunct Professor at the Bainbridge Graduate Institute and the author of The Economics of Happiness. Mark has developed a "Genuine Wealth Indicator" that can help any community measure its wealth across a number of indicators in order to measure those things we actually want.

We need new measurement tools if we are going to achieve sustainability. It is high time we stopped using GDP as a tool to measure our economic progress.

No comments: