Nicolas Sarkozy, France's president, is concerned that gross domestic product, the most popular yardstick of economic performance, does not capture how well societies (in particular, no doubt, France) are doing. Uncharitable souls may think he set up his commission on measuring “social progress” mainly to kick Anglo-Saxon capitalism while it was down. In fact, its report is full of sensible, if old, insights.
GDP is riddled with imperfections. It only covers production exchanged in the private market or the public sector and misses the vast amount of productive activity inside the household, such as family care for children and the elderly. Ignoring sustainability, GDP is boosted by resource depletion that may increase income today but lower it in the future: a form of destruction more than production.
This is not news; the creators of national accounts recognised these shortcomings. Reminding ourselves of them is, however, timely, since the shift to paid work and the depletion of resources increasingly characterise our economies.