Measuring Well-being and Societal Progress - Beyond GDP

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Chart 4. Real household disposable income, real final consumption expenditure and real GDP per capita,average annual growth rate, 1994-2003PercentageGDP and household disposable income per capitaGDP and final consumption expenditure per capita77Household disposable income per capita6543210PRTNORGBRUSA CZE FINFRAAUSNLDNZLDEU AUT SWEDNKCHECANGRCBELMEX ITATUR JPNHUNSVKPOLKOR0 1 2 3 4 5 6 7GDP per capitaPrivate consumption per capita6543210CHENORCZEGBRHUNAUS FINUSAISLCANNZLESPLUXFRAGRCNLD SWEITAPRTAUTDEU DNKMEXJPNBELTURPOLSVK KOR0 1 2 3 4 5 6 7GDP per capitaIRLSource: OECD annual national accounts and OECD (2005), OECD Economic Outlook, No. 76, Paris.1.2.4. Summing-up on monetary indicatorsOverall, when we remain confined within the borders of the System of National Accounts, there is afair degree of convergence in the levels and, to a lower extent, the growth rates of the different measures ofcountry-wide economic resources, whatever the different adjustments made. But the more realistic thepicture of the economic resources that households actually have at their disposal to secure their well-being,the less convergence there is with country-wide measures of economic resources.The indicators of economic resources discussed above measure a key factor for securing the wellbeingof individuals and society. But, however important economic resources are, they don’t tell the wholestory – as the old adage tells us, “money doesn’t buy happiness”. This would seem to be particularly true associeties move beyond the point where they are capable of meeting the basic needs of the population forfood, shelter and clothing. Economists have recognised this limit themselves and have endeavoured todevelop various other mechanisms for taking into account non-market factors. 81.3. Additional adjustments to national accounts measuresThe measures of the economic resources that are derived from the national accounts can be adjustedby attaching a monetary value to various non-monetary factors in order to obtain a better proxy of the well-8A comprehensive approach to the construction of non-market accounts in the fields of home production, humancapital, the environment, health and education, government and the non-profit sector is described in Abraham andMackie (2005), which summarises the conclusions of a panel of the National Research Council for the United States.10
eing of individuals and societies. The main difficulty is how to price different non-market activities, suchas leisure, and unrecorded economic activities, such as work in the home. Different estimates generallyvalue the inputs into these activities based on either replacement costs or opportunity costs. Some resultssuggestive of the impact of some of these non-market factors are presented below.1.3.1. Well-being and leisureUsing GDP-derived measures as proxies for well-being takes no account of leisure time. Yet leisuretime is obviously of great importance to almost everyone’s well-being. In this sense, it is a “good” that hasa certain marginal utility. But how can we measure its quantity? And how should it be valued? We arecertainly far from having satisfactory responses to these questions. Still, the large cross-country differencesin the annual amount of paid work performed by workers suggest that there are big differences in theamount of leisure time that they enjoy in different countries. Part of the gap in GDP per capita between theUnited States and most other OECD countries reflects the greater number of hours American workers workeach year. How much is this due to differences in culture and/or preferences, and how much to the impactof policies and institutions? While it is impossible to answer these questions precisely, any realisticevaluation of well-being needs to ascribe some monetary value to the leisure time of workers. 9This valuation is performed here by adding to GDP per capita an estimate of the quantity of leisuretime annually enjoyed by each worker. This quantity of leisure time is valued in three different ways: atGDP per hour worked, at the hourly compensation of each worker and at half of hourly compensation (toallow for the possibility that lower working hours in some countries may reflect the impact of taxes andother policies). Plotting the gaps relative to the United States in “leisure-adjusted” GDP per capita usingthese three approaches shows that any positive valuation to leisure narrows the gaps relative to those basedon GDP per capita (the higher the valuation placed on leisure, the narrower the gap). The average annualgrowth in “leisure-adjusted” GDP per capita tends to exceed that of GDP, with the difference beingespecially large in some European countries (Chart 5).9Accounting for the leisure time of non-employed persons would require controversial assumptions on whetherunemployment is voluntary or involuntary, and to distinguish between the home production and the leisure time ofhousewives. An earlier assessment of the impact of leisure time (and income inequality) on well-being was providedby Beckerman (1978).11
Page 4: 16 indicators described above into
Page 8 and 9: Chart 3. Gross domestic product, gr
Page 12 and 13: Chart 5. Average annual growth rate
Page 15 and 16: Chart 7. Real annual change in hous
Page 17 and 18: • Across time, the coexistence of
Page 19 and 20: Norwegian Ministry of Finance and t
Page 21 and 22: • The use of subjective measures
Page 23 and 24: will be assessed by individual citi
Page 25 and 26: REFERENCESAbraham, K.G. and C. Mack

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