An Index of Economic Well-Being for Selected OECD Countries

Per capita gross domestic product (GDP) is a poor indicator of economic well-being. It measures effective consumption poorly (ignoring the value of leisure and of longer life spans) and it also ignores the value of accumulation for the benefit of future generations. Since incomes are uncertain and unequally distributed, the average also does not indicate the likelihood that any particular individual will share in prosperity or the degree of anxiety and insecurity with which individuals contemplate their futures. We argue that a better index of economic well-being should consider: Current effective per capita consumption flows; net societal accumulation of stocks of productive resources; income distribution; and economic security. The paper develops such an index of economic well-being for the U.S., U.K., Canada, Australia, Norway and Sweden for the period 1980 to 1999. It compares trends in economic well-being to trends in GDP per person. In every case, growth in economic well-being was less than growth in GDP per capita, although to different degrees in different countries