- The Washington Times - Tuesday, September 15, 2009

PARIS | French President Nicolas Sarkozy asked world leaders to join a “revolution” in the measurement of economic progress by dropping their obsession with gross domestic product to account for factors such as happiness, leisure time and availability of health care.

In a speech on the first anniversary of the collapse of Lehman Brothers, Mr. Sarkozy said the financial crisis has shown the need for a better way of calculating a country’s economic health.

His own country, known for its leisurely meals, long vacations and labor protections, could outshine more profit-focused economies if nations act on new recommendations in a report headed by two Nobel Prize-winning economists commissioned 18 months ago.

The report offers a raft of factors that governments should take into account when making policy, such as environmental sustainability. But it doesn’t specifically suggest a new statistical index.

Any worldwide shift would require other nations to get on board, and some economists questioned whether rethinking GDP would work.

Mr. Sarkozy will nonetheless try to persuade other world leaders to sign on to the proposals at this month’s Group of 20 summit in Pittsburgh, said Henri Guaino, a special adviser to Mr. Sarkozy.

The report recommends looking at household income, consumption and wealth rather than national production for a better reflection of material living standards. Non-market activities such as housecleaning should also be tracked, it says.

U.S. economist Joseph Stiglitz, winner of the 2001 Nobel Prize for economics and a critic of free-market economists, co-authored the report.

“GDP is an attempt to measure one part of what is going on in our society which is market production. It is what I call GDP fetishism to think success in that part is success for the economy and for society,” he said.

Advising Mr. Stiglitz was Armatya Sen of India, who won the 1998 Nobel Prize for work on developing countries and helped create the U.N. Human Development Index, a yearly welfare indicator designed to gear international policy decisions to take account of health and living standards.

Simon Tilford, chief economist at the Center for European Reform in London, said that while broader measures of well-being already exist, they are hugely subjective and don’t help governments make decisions on how to allocate resources.

“There has been growing interest in trying to measure human well-being in other ways” than GDP, he said.

But for understanding an economy’s prospects, he said, “GDP is still a far superior measure to a type of softer, happiness or well-being index. That’s not to say they’re not useful, but it’s hard to see how they could replace GDP.”

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