Beyond GDP: Measuring and Valuing What Really Matters

Rethinking the UN’s “beyond GDP” agenda and the case for putting wealth at the centre

I recently signed a letter to António Guterres, along with a group of economists and statisticians, arguing that current proposals to move “beyond GDP” are heading in the wrong direction.

The UN high level group on the issue is considering proposals to change the scope for how to measure econonomic activity. The ambition is right. GDP alone is not enough. But the emerging approach is becoming too broad and it is trying to capture everything about well-being rather than focusing on a small number of indicators that can actually guide policy.

Our argument is simple: if GDP measures income, what it is missing is wealth.

We propose broadening national accounts to take account of comprehensive wealth. This is an idea to focus on the change in the wealth of nations in terms of their produced, natural, and human capital, but also taking account of other forms of wealth such as institutions and social capital.

This may seem like a modern idea but it is one with a long history. Contributions can be traced to figures such as Arthur Pigou in the fourth edition The Economics of Welfare, as well as to work in the 1970s that thought of the natural environment as a capital stock. Most recent high profile contributions include major work by Sir Partha Dasgupta (Human Well-Being and the Natural Environment) and Martin Weitzman (Income, Wealth, and the Maximum Principle).

In fact, the idea goes back to the The Wealth of Nations. Adam Smith saw capital (wealth) as the mainstay of society:

To maintain and augment the stock which may be reserved for immediate consumption is the sole end and purpose both of the fixed and circulating capitals. It is this stock which feeds, clothes, and lodges the people. Their riches or poverty depends upon the abundant or sparing supplies which those two capitals can afford to the stock reserved for immediate consumption. (WON, Book II,c.i)

Smith also saw capital being comprised of different forms: “of all useful machines and instruments of trade which facilitate and abridge labour” ; “of all those profitable buildings... etc.”; “improvements of land”; and “of the acquired and useful abilities of all the inhabitants or members of the society...Those talents, as they make a part of his fortune, so do they likewise of that of the society to which he belongs.”

In other words Smith saw the wealth of nations as made up of different forms of capital and how they interact. This is something I have written about before and it is the subject of my current book.

At the same time Smith was famously sceptical when it came to actually measuring the wealth of nations and he had ‘no great faith in political arithmetic’. This reflects the unease that many still have with economic statistics. Smith was a convert to the value of political arithmetic from his time as a customs-master in Edinburgh.

The history of political arithmetic and of statistics shows us that how we measure the economy changes over time. The focus on the early twentieth century as the origin of national accounting obscures a much longer history of debate about how best to measure economic activity and compare countries. As the economy evolves and our data improves, so too must our methods.

This matters for how we move beyond GDP today. Expanding national accounts to include wealth is not simply an academic exercise; it raises questions about consistency and standardisation. In my own work with co-authors (short summary here), comparing approaches taken by the World Bank and the United Nations Environment Programme, we found that different frameworks often develop in parallel without sufficient cross-reference.

Here, history is instructive. The standardisation of national accounting in the 1930s and 1940s, culminating in the UN System of National Accounts, created a common framework that countries continue to use. That achievement was not inevitable; it was the result of deliberate choices about what should count and how it should be measured.

The challenge now is whether we can extend that system to incorporate wealth without losing the clarity and comparability that made it successful in the first place.