GDP and Wellbeing

lesire adjusted gdp.JPG

"Work may drive growth, but for most people, more free time contributes to well-being, as long as it is not accompanied by lower income. Still, one often-heard remark about the gap in economic performance between OECD countries is that US workers may earn more money but they work longer hours, whereas Europeans prefer more leisure to more work, or indeed, more money, and so are better off. But would ascribing monetary values to leisure time, however arbitrarily, alter GDP per head rankings in favour of European countries? Not by much, according to the latest Going for Growth report. By estimating workers’ time devoted to personal (unpaid) activities, it reports that leisure-adjusted GDP per capita relative to the US is higher for most countries than for the normal measure. But the ranking of OECD countries stays broadly unchanged, with the US still in the top five.

Separately, the OECD Factbook 2006 reports that US household spending on leisure has risen faster than the OECD average over the last decade. It measures spending on recreation and culture by households and government on a range of items from music, show business and sport to pets and photography. Gardening and gambling are also included, but restaurants, hotels and most travel are not. By this measure, the US spends more than France, but less than Spain or the UK."
-OECD Observer

Why is GDP not the best possible indicator of well-being?

- GDP is a production concept, whereas well-being depends more on income and
consumption of individuals and households.

- GDP is a “gross” concept: It makes no allowance for the using-up of capital equipment in
the production of goods and services, and the corresponding need to re-invest part of the
output to maintain production capacity unchanged.

- GDP makes no allowance for the using-up of non-renewable resources, which will
impact on the well-being of future generations.

- GDP excludes leisure, which is clearly of value to society and contributes to well-being.

- GDP does not distinguish between different varieties of income distribution. A society in
which there were a few colossally wealthy families, but the bulk of the population lived
in abject poverty, would presumably enjoy a lower level of “general well-being” than one
with the same GDP but where there was no acute poverty.

- Production might entail the co-production of “bads” (e.g. pollution and deterioration of
the environment). These are rarely taken account of in the GDP accounts.


A very interesting chart. Am I misreading it or does the chart not feature the US?

The US' leisure-adjusted GDP is the black line.


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This page contains a single entry by Paul published on June 1, 2006 1:27 AM.

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