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Removing GDP from the equation: integrating health and wellbeing into national development metrics
Re: Valuing health as development: going beyond gross domestic product
Despite its ubiquity as an indicator of progress, gross domestic product (GDP) does not reveal the economic wellbeing of a nation. Fan, Bloom, Ogbuoji, Prettner and Yamey outline some of the problems with GDP, particularly regarding its inability to reflect the value of health investments. Although other indicators of development exist, as the authors point out, none are entirely satisfactory. Further, the prominence and frequency of reporting of GDP give it an advantage in maintaining its status over potential competitors via both agenda-setting [1] and priming [2] effects.
Fan et al. propose an alternative measure to capture the value of health in economic development:
Alternative wellbeing measure = (GDP per capita) x (healthy life expectancy) x (median income)/(mean income)
As the authors explain, this formula has advantages over the other measures of progress they mention. However, it also has some disadvantages: Including GDP as a variable is not ideal, firstly due to its well-acknowledged inability to capture progress in human (as opposed to narrow financial) terms [3] and secondly because its presence within the formula perpetuates the prominence of GDP through repeated use, as described above. If we wish to shift the balance in favour of alternative measures capable of reflecting wellbeing, including GDP within such measures may act against that objective. In light of this, Fan et al.’s proposal might be improved by removing GDP from the equation altogether.
As for what to replace it with, one option could be the genuine progress indicator (GPI), which aims to reflect economic wellbeing through 24 benefit and cost components that affect economic, social and environmental welfare [4]. Unlike GDP, it separates the impact of economic activity that enhances welfare from activity which has a negative impact on welfare [5] as well as placing a value on activities that have a positive impact but fall outside the market, such as childcare and volunteering. While still not a perfect measure, an advantage of GPI is that it includes income inequality as one of its dimensions. Therefore, replacing GDP in Fan et al.’s proposal with GPI also makes it possible to simplify the formula by removing the median/mean income variable.
If GDP and the income inequality components of the equation are replaced with GPI, this leaves healthy life expectancy. Although it is important to include quantity of healthy life in a development metric incorporating the value of health, the formula could be improved by taking account of not only average healthy life expectancy, but also (just as in the case of income) inequality in healthy life expectancy. For example, in England, average healthy life expectancy is 63 years but there is a greater than 18-year gap in healthy life expectancy between the socioeconomically most deprived and least deprived areas [6].
Therefore, it may be appropriate to suggest a revised formula which includes not only GPI and average healthy life expectancy (HLE), but also the range of healthy life expectancy (HLER):
Alternative wellbeing measure = (GPI per capita) x (HLE)/(HLER)
This embodies some of the benefits of the proposal from Fan et al. while dispensing with the problems of including GDP and with the added strength of reflecting inequality in healthy life expectancy.
References
1. Edelstein, AS. Thinking about the criterion variable in agenda-setting research. Journal of Communication. 1993 43:85-99.
2. Ellis NC. Frequency effects in language processing: A review with implications for theories of implicit and explicit language acquisition. Studies in second language acquisition. 2002 Jun;24(2):143-88.
3. Van den Bergh JC. The GDP paradox. Journal of Economic Psychology. 2009 Apr 1;30(2):117-35.
4. Kubiszewski I, Costanza R, Franco C, Lawn P, Talberth J, Jackson T, Aylmer C. Beyond GDP: Measuring and achieving global genuine progress. Ecological Economics. 2013 Sep 1;93:57-68.
5. Costanza R, Erickson J, Fligger K, Adams A, Adams C, Altschuler B, Balter S, Fisher B, Hike J, Kelly J, Kerr T. Estimates of the genuine progress indicator (GPI) for Vermont, Chittenden County and Burlington, from 1950 to 2000. Ecological Economics. 2004 Nov 1;51(1-2):139-55.
6. Office for National Statistics. Health state life expectancies by national deprivation deciles, England and Wales: 2014 to 2016. ONS Statistical Bulletin. March 2018.
Competing interests:
No competing interests
11 November 2018
Ursula Pool
Research Fellow
Healthy and Sustainable Settings Unit, University of Central Lancashire, UK
Re: Valuing health as development: going beyond gross domestic product
Despite its ubiquity as an indicator of progress, gross domestic product (GDP) does not reveal the economic wellbeing of a nation. Fan, Bloom, Ogbuoji, Prettner and Yamey outline some of the problems with GDP, particularly regarding its inability to reflect the value of health investments. Although other indicators of development exist, as the authors point out, none are entirely satisfactory. Further, the prominence and frequency of reporting of GDP give it an advantage in maintaining its status over potential competitors via both agenda-setting [1] and priming [2] effects.
Fan et al. propose an alternative measure to capture the value of health in economic development:
Alternative wellbeing measure = (GDP per capita) x (healthy life expectancy) x (median income)/(mean income)
As the authors explain, this formula has advantages over the other measures of progress they mention. However, it also has some disadvantages: Including GDP as a variable is not ideal, firstly due to its well-acknowledged inability to capture progress in human (as opposed to narrow financial) terms [3] and secondly because its presence within the formula perpetuates the prominence of GDP through repeated use, as described above. If we wish to shift the balance in favour of alternative measures capable of reflecting wellbeing, including GDP within such measures may act against that objective. In light of this, Fan et al.’s proposal might be improved by removing GDP from the equation altogether.
As for what to replace it with, one option could be the genuine progress indicator (GPI), which aims to reflect economic wellbeing through 24 benefit and cost components that affect economic, social and environmental welfare [4]. Unlike GDP, it separates the impact of economic activity that enhances welfare from activity which has a negative impact on welfare [5] as well as placing a value on activities that have a positive impact but fall outside the market, such as childcare and volunteering. While still not a perfect measure, an advantage of GPI is that it includes income inequality as one of its dimensions. Therefore, replacing GDP in Fan et al.’s proposal with GPI also makes it possible to simplify the formula by removing the median/mean income variable.
If GDP and the income inequality components of the equation are replaced with GPI, this leaves healthy life expectancy. Although it is important to include quantity of healthy life in a development metric incorporating the value of health, the formula could be improved by taking account of not only average healthy life expectancy, but also (just as in the case of income) inequality in healthy life expectancy. For example, in England, average healthy life expectancy is 63 years but there is a greater than 18-year gap in healthy life expectancy between the socioeconomically most deprived and least deprived areas [6].
Therefore, it may be appropriate to suggest a revised formula which includes not only GPI and average healthy life expectancy (HLE), but also the range of healthy life expectancy (HLER):
Alternative wellbeing measure = (GPI per capita) x (HLE)/(HLER)
This embodies some of the benefits of the proposal from Fan et al. while dispensing with the problems of including GDP and with the added strength of reflecting inequality in healthy life expectancy.
References
1. Edelstein, AS. Thinking about the criterion variable in agenda-setting research. Journal of Communication. 1993 43:85-99.
2. Ellis NC. Frequency effects in language processing: A review with implications for theories of implicit and explicit language acquisition. Studies in second language acquisition. 2002 Jun;24(2):143-88.
3. Van den Bergh JC. The GDP paradox. Journal of Economic Psychology. 2009 Apr 1;30(2):117-35.
4. Kubiszewski I, Costanza R, Franco C, Lawn P, Talberth J, Jackson T, Aylmer C. Beyond GDP: Measuring and achieving global genuine progress. Ecological Economics. 2013 Sep 1;93:57-68.
5. Costanza R, Erickson J, Fligger K, Adams A, Adams C, Altschuler B, Balter S, Fisher B, Hike J, Kelly J, Kerr T. Estimates of the genuine progress indicator (GPI) for Vermont, Chittenden County and Burlington, from 1950 to 2000. Ecological Economics. 2004 Nov 1;51(1-2):139-55.
6. Office for National Statistics. Health state life expectancies by national deprivation deciles, England and Wales: 2014 to 2016. ONS Statistical Bulletin. March 2018.
Competing interests: No competing interests