Contributing Editor David Hand writes:

How should we measure national wellbeing? The first stage in answering such a question is deciding exactly what it is that we’re talking about. It’s clear, at least for national wellbeing, that the definition of what we want to measure and the procedure we construct for measuring it are intimately bound. One might even say they are two sides of the same question. Such measurements, where the definition and measurement procedure are in some sense the same thing, are sometimes called pragmatic measurements. They stand in contrast to representational measurements—measuring attributes such as mass or length, for example, where one makes an explicit mapping from the physical system to a numerical system. With pragmatic measurements, change your measurement procedure and you change the definition: in our context, you change what you mean by wellbeing.

However you look at measuring national wellbeing, it’s a statistical question. One way or another it’s necessary to summarize and aggregate a wide range of numbers to yield one (or perhaps a vector) which answers the question. Indeed, Ronald Fisher himself (1922) said, “the object of statistical methods is the reduction of data.”

Motivated by the Great Depression of 1929–31, efforts were made in the 1930s to condense economic numbers down to measure national income. These gradually matured into today’s gross domestic product (GDP), which has become the single headline indicator used to guide economic policies. But it’s clear, even from the very name, that as a measure of national wellbeing, GDP has significant shortcomings. Its focus on economic matters leaves a great deal unsaid.

In a famous speech delivered in 1968, Robert Kennedy drew attention to this. He was speaking about gross national product rather than GDP, but the point is the same: “Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product … counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and jails for those who break them. It counts the destruction of our redwoods and the loss of our natural wonder in chaotic sprawl. It counts napalm and the cost of a nuclear warhead, and armored cars for police who fight riots in our streets. … Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile.” (Kennedy, 1968)

Recognizing these shortcomings of simplistic economic indicators of “progress,” the then-president of France, Nicholas Sarkozy, set up a Commission on the Measurement of Economic Performance and Social Progress, chaired by the Nobel laureate Joseph Stiglitz, advised by fellow laureate Amartya Sen, and coordinated by economist Jean-Paul Fitoussi. The report appeared in book form in 2010 with the title Mismeasuring our Lives, and contained 12 recommendations for broader measures of social progress: five concerned with classical economic issues, five concerned with quality of life, and two concerned with sustainable development and the environment. After all, regarding the last, it would be hard to argue that a nation was in a good state of wellbeing if it was rapidly exhausting its non-renewable resources. In general, national wellbeing should consider human capital, social capital, natural capital, the measurement of household wealth, and subjective wellbeing. It should also consider inequality: there is evidence that greater inequality (e.g. of wealth) in societies is associated with lower overall average wellbeing.

The Stiglitz report was just one of a number of initiatives aimed at better capturing the state and progress of a nation. Others include the OECD’s “Better Life Initiative” and the UK’s “Measuring National Well-being” programme. More generally still, United Nations resolution 65/309 invites countries “to pursue the elaboration of additional measures that better capture the importance of the pursuit of happiness and well-being in development with a view to guiding public policies.”

Ken Alder, in his book describing how Jean-Baptiste-Joseph Delambre and Pierre-Françoise-André Méchain measured the Earth, says, “Measures are more than a creation of society, they create society.” By deciding what to measure, we can decide what sort of society we would like to create.

Alder, K. (2002) The Measure of All Things: the Seven-Year Odyssey that Transformed the World. London: Little, Brown. (p342)
Fisher, R.A. (1922) On the mathematical foundations of theoretical statistics. Philosophical Transactions of the Royal Society of London, Series A, 222, 309-368
Kennedy, R.F. (1968). Univ. of Kansas Address (quote starts at 16:22 mins). Accessed 26 July 2013

And how are we?