There was an interesting blog post over at the Telegraph by Geoffrey Lean over the weekend. He asked if GDP is “past its sell by date”, noting that “the EU is due to publish a paper which will conclude that GDP is too limited a measurement.”

I agree with the view that GDP doesn’t tell you the whole picture. I have written before about the obsession that the media and others have with what this or that will “cost the economy”. These stories normally come along with some kind of figure of the effect some trend or other will have on GDP.

GDP is quite a useful measurement in a lot of ways. As a barometer of how things are ticking along, it isn’t bad. When GDP rises steadily things are ticking along quite nicely. When it decreases people generally feel it. In truth, no-one needed to wait for the GDP figures to come round to work out that things were bad. But GDP does give us a vaguely useful way to quantify how things are going.

However, it omits a lot of useful information that might help us to measure our quality of life. Perhaps most strikingly of all, it takes very little account of leisure — surely the best part of life.

You can be fairly certain that the economy is producing more between 8am and 8pm than it is between 8pm and 8am. The economy goes into recession every night! But in which part of the day is your quality of life higher? The part where you’re slaving away in a stuffy office, or the part where you’re relaxing with a cold beer?

Enjoying yourself and relaxing, whether it’s having your nightly kip or spending an afternoon in the park, often means removing yourself from economic activity. This in turn leads to a reduction in GDP. That is “the cost to the economy”. This is despite the fact that sleeping and having a stroll in the park are both very valuable activities.

I am currently reading The Armchair Economist by Steven E. Landsburg (I’m only 15 years late to the party). This book points out that GDP is also unable to account for the value of housework. If you pay someone to do your dishes, the value is counted in GDP figures. If you do them yourself, GDP is unaffected. But in both cases you have a rack of clean dishes of equal value.

Geoffrey Lean also points out that GDP fails to take the environment into consideration. An economist would say you need to internalise the externalities. But the question is how? (Pigovian taxes are a nice idea.) Some extreme environmentalists go further and advocate zero growth, an idea rightly lambasted by Adopted Domain.

I guess it all depends on what you want an indicator to tell you. GDP has become the one everyone talks about as a proxy for our standard of living, but clearly has deficiencies in that it leaves out important elements that contribute to our standard of living.

Unemployment figures are a possible alternative. On one level, it can be said that unemployment is the main thing that worries people. Despite the often-made point that unemployment is a lagging indicator, for many it is the bottom line.

But this has many of the same problems as using GDP. We look forward to our weekends, our holidays, and ultimately our retirement. Not working is actually a good thing. Few people want to work. They only want the money they earn from working. That brings us right back to GDP.

In recent years there has been a bit of hype about happiness economics (which I have previously written about). This field likes to measure Gross National Happiness. But this too is fraught with difficulties, not least the fact that it relies on shaky survey data based on people’s varying interpretations of what “happiness” is.

Perhaps you could stop paying attention to aggregate statistics in general. On one level, what really concerns me is my own personal well-being. How much I earn, how much disposable income I have, whether I have a job and how happy I am all concern me greatly. I am less concerned about other people’s well-being.

But that’s not quite right either. Even though I, like most people, am primarily worried about myself, I do care about the general well-being of other people.

It looks like we have to make do with GDP as the main measure to be concerned with. However, it does seem that it is creaking a bit with old age. No doubt there will be plenty of criticisms of GDP to come in the future, particularly from environmentalists.

Beware of the alternatives people advocate though. They will probably all be biased one way or another. Any proposed new measurements will probably be put forward by some interest group trying to manipulate the terms of the debate in its favour. Were that scenario to arise, I would rate myself 3 out of 10 happy.