Beyond GDP: Measuring Welfare and Assessing Sustainability

Hardcover | May 13, 2013

byMarc Fleurbaey, Didier Blanchet

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In spite of recurrent criticism and an impressive production of alternative indicators by scholars and NGOs, GDP remains the central indicator of countries' success. This book revisits the foundations of indicators of social welfare, and critically examines the four main alternatives to GDPthat have been proposed: composite indicators, subjective well-being indexes, capabilities (the underlying philosophy of the Human Development Index), and equivalent incomes. Its provocative thesis is that the problem with GDP is not that it uses a monetary metric but that it focuses on a narrow set of aspects of individual lives. It is actually possible to build an alternative, more comprehensive, monetary indicator that takes income as its first benchmark and adds orsubtracts corrections that represent the benefit or cost of non-market aspects of individual lives. Such a measure can respect the values and preferences of the people and give as much weight as they do to the non-market dimensions. A further provocative idea is that, in contrast, most of the currently available alternative indicators, including subjective well-being indexes, are not as respectful of people's values because, like GDP, they are too narrow and give specific weights to the various dimensions of life in a moreuniform way, without taking account of the diversity of views on life in the population. The popular attraction that such alternative indicators derive from being non-monetary is therefore based on equivocation.Moreover, it is argued in this book that "greening" GDP and relative indicators is not the proper way to incorporate sustainability concerns. Sustainability involves predicting possible future paths, therefore different indicators than those assessing the current situation. While various indicatorshave been popular (adjusted net savings, ecological footprint), none of them involves the necessary forecasting effort that a proper evaluation of possible futures requires.

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In spite of recurrent criticism and an impressive production of alternative indicators by scholars and NGOs, GDP remains the central indicator of countries' success. This book revisits the foundations of indicators of social welfare, and critically examines the four main alternatives to GDPthat have been proposed: composite indicators,...

Marc Fleurbaey is the Robert E. Kuenne Professor of Economics and Humanistic Studies and Professor of Public Affairs and the University Center for Human Values. Didier Blanchet is Head of the Department of General Economic Studies at University Paris Descartes.

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Format:HardcoverDimensions:320 pages, 9.25 × 6.12 × 0.98 inPublished:May 13, 2013Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:019976719X

ISBN - 13:9780199767199

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Table of Contents

PrefaceIntroduction: The four musketeers1. A wealth of indicators1.1 Introduction1.2 A bird?s eye view1.3 Aggregating the non-aggregatable?1.4 Correcting GDP1.5 Sustainability assessment: weak or strong?1.6 Coping with multidimensionality: dashboards1.7 An overhanging question: how far can aggregation go?2. Measuring sustainability2.1 Introduction2.2 Wealth and sustainable well-bei2.2.1 Discounting future streams of well-being?2.2.2 From intertemporal well-being to sustainable consumption2.3 The savings approach: a reference framework2.3.1 Shifting the focus to sustainability : why?2.3.2 Assessing sustainability in imperfect but predictable econo2.3.3 An example2.4 The savings approach: several pending problems2.4.1 Monetization in practice2.4.2 Behavioral indeterminacy or when "weak" indicators can turn out too strong2.4.3 Technological and normative uncertainties2.4.4 An additional problem: the cross-national dimension of unsustainability2.5 Conclusion: where to go from there?3. A price for everything?3.1 A revealed preference argument3.1.1 The argument for an individual consumer3.1.2 Extending the argument to social welfare through a representative agent3.1.3 Extending the argument to social welfare with an optimality assumption3.2 A variant of the revealed preference argument3.3 The theory of index numbers3.3.1 An axiomatic approach3.3.2 Approximating welfare changes3.4 Decomposing welfare3.4.1 A first decomposition, with the social expenditure function3.4.2 A second decomposition, in terms of efficiency and equity3.4.3 A new decomposition, based on Bergson curves3.4.4 Another decomposition, for small variations3.5 Specific problems with imputed prices and full income3.6 Conclusion4. Equivalent income, or how to value what has no price4.1 Money-metric utility and equivalent income4.2 Knock-out criticism?4.2.1 Not welfarist enough4.2.2 Too welfarist4.2.3 Potentially regressive4.2.4 Reference dependent4.2.5 Arrow's coup de grace4.3 Fairness to the rescue4.3.1 The equivalence approach in fair allocation theory4.3.2 Arrow Independence is not compelling4.3.3 References need not be arbitrary4.3.4 The right dose of welfarism4.3.5 Bundle dominance is unacceptable4.3.6 Egalitarianism is demanding4.4 Social welfare decomposition4.5 Conclusion5. Is happiness all that matters?5.1 The Easterlin paradox: Have we been wrong for 70,000 years?5.1.1 Bentham is back5.1.2 The debate about subjective welfarism5.1.3 Is happiness the ultimate goal?5.1.4 The key objection to subjective sco5.2 A theory of subjective well-being5.2.1 Azects and judgments5.2.2 The three problems of the respondent5.2.3 Heterogeneous and shifting standards5.2.4 What do people care about?5.2.5 Comparisons across preferences5.3 Making use of happiness data5.3.1 Proposed indicators5.3.2 Putting azects in their place5.3.3 Identification problems5.3.4 Can happiness data be improved?5.4 Conclusion6. Empowering capabilities6.1 The capability approach6.1.1 From basic needs to capabilities6.1.2 Functionings, between "opulence" and "utility"6.1.3 From functionings to capabilities6.2 Capabilities as opportu6.2.1 Valuing sets6.2.2 The relevant aspects of opportu6.2.3 Shaping opportunity sets6.2.4 Equality against set valuation6.2.5 Why capabilities?6.3 The valuation issue6.3.1 The intersection approach6.3.2 Disagreement and respect for diversity6.3.3 Implications of respect for personal preferences6.4 Is the CA a separate approach?Conclusion: How to converge on a multiplicityWhy synthetic indicators?Shortcuts and pitfallsVices and virtues of monetary indicatorsA multiplicity of synthetic indicatorsSustainability warningsA A theory of the reference for equivalent incomesA.1 The modelA.2 Reference operatorsA.3 Non-market goodsA.4 Market pricesA.5 The household problemB ProofsB.1 A Paretian rank-dependent criterionB.2 Reference-price independenceB.3 A simple proof of Arrow's theorem in an economic frameworkBibiliography