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When things are traded in a market, or embedded in government tax statistics, they are relatively easy to measure. Many of our measurement difficulties arise

When things are traded in a market, or embedded in government tax statistics, they are relatively easy to measure. Many of our measurement difficulties arise precisely because some of the most valuable things are not easily measurable. GDP easily captures the output of washing machines, but not of happiness, health or environmental depreciation. Since we do not buy and sell clean air or moderate temperatures in a marketplace, governments are not automatically collecting statistics for use in national accounts data.

The United Nations Human Development Index systematically tries to measure three broad dimensions of economic development - health, education and material standard of living -and produces annual statistics for all UN member countries. The map below shows the geographic range of outcomes - no prizes for guessing which colours represent prosperity and which represent poverty as measured by the Human Development Index. Health is crudely captured by life expectancy at birth, education by the proportion of the children enrolled at school and by the proportion of adults who can read, and material standard of living by per capita GDP. Some of these indicators are more stable than others. For example, before the financial crash, Iceland came top in the world in the UN measure, and Sierra Leone bottom. But Iceland's banks experienced the biggest crash of all, and the Icelandic economy got into serious trouble. So GDP rises because we are spending more on the police force. But in reality, people are feeling less happy with the greater prevalence of crime, and resent having to 'waste' more resources on additional policing in order to counter the crime wave. Conversely, when we cut back the size of the army, GDP falls since less is being spent on the military, but we are actually receiving less defence as a consequence. Think of all this as a health warning on GNP and GDP statistics. They measure what they measure. Unless and until electorates want to spend a lot more money collecting more comprehensive statistics, GNP and GDP will use data already being collected annually for other purposes such as taxation.

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