Indicators of Economic Progress: The Power of Measurement and Human Welfare

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Table of Contents

  1. Introduction
  2. Tools and Measures
  3. Measures of National Income
  4. Need for New Theory
  5. Measures and Indicators
  6. Characteristics of a Successful Indicator
  7. The Problem of Value
  8. What are we trying to measure?
  9. Alternative indices
  10. Components of Economic Welfare
  11. Human Economic Welfare Index (HEWI)
  12. Composite HEWI
  13. Conclusions
  14. Endnotes

1. Introduction

Right measurement is a powerful instrument for social progress; wrong or imprecise  measurement a source of hazard and even havoc. The essential purpose of economic activity is the promotion of human development, welfare and well-being in a sustainable manner, and not growth for growth’s sake, yet we lack effective measures to monitor progress toward these objectives. Advances in understanding, theory and measurement must necessarily proceed hand in hand. A companion article in this publication sets forth the urgent need for new theory in economics. This article sets forth the complementary need for new measures. The stakes are high and the choice is ours. On one side, rising social  tensions, recurring financial crises and ecological disaster; on the other, the progressive unfolding and development of human capacity in harmony with Nature. The deficiencies of GDP as a measure are welldocumented by leading economists Kuznets,  Tobin, Tinbergen and many others; but, unfortunately, decision-making still remains  largely based on GDP, valid during