An Alternative Conceptual Framework to GDP for Measuring Well-Being: Interview with James K. Boyce

For many years now, the GDP has been severely criticized as not adequately measuring economic progress and the quality of life. The truth, however, is that the GDP was not designed to measure human welfare, yet this is the reason why we need an alternative conceptual framework that focuses on well-being. 

In the interview that follows, world-renowned economist James K. Boyce spells out the limitations of GDP and presents an alternative approach for measuring economic performance that “can contribute to efforts to build more successful economies and more democratic societies here and now.”  James K. Boyce is professor emeritus of economics and senior fellow of the Political Economy Research Institute at the University of Massachusetts Amherst. He is the author of Economics for People and the Planet: Inequality in the Era of Climate Change. He received the 2025 Common Wealth Prize, the 2024 Global Inequality Research Award, and the 2017 Leontief Prize for Advancing the Frontiers of Economic Thought.

J. Polychroniou: Gross Domestic Product (GDP) was born in 1944 and has since been the standard measure for tracking a country’s economic growth. Basically, it measures market output and has been widely used by the major Bretton Woods institutions -- i.e., the International Monetary Fund and the World Bank. However, the idea of using GDP as a means of measuring a nation's economic health and relying on it to make fiscal and monetary policy decisions has come under attack in recent years. In fact, in 2009, the Sarkozy-Stiglitz commission produced a much discussed report that highlighted the inadequacies of GDP and proposed new ways of measuring progress. Is the main problem with GDP that it does not measure all output and hence does not offer a complete picture of economic growth, or that it is simply the wrong tool for measuring economic well-being?

James K. Boyce: GDP measures anything a society produces that comes with a price tag attached. This is an inadequate measure of economic well-being for reasons that involve questions of what, who, and when.

What? Many things that are essential to well-being – for example, clean air, clean water, and unpaid care for children – are omitted from GDP because they are not bought and sold in the market. Assigning the “right” price to them would be difficult, but zero is clearly the wrong price. Meanwhile, other items that are counted in GDP are a result of things that diminish well-being. Wars and oil spills, for example, are bad for human well-being, but money spent on them adds to GDP.

Who? In GDP, dollars all count the same regardless of who gets them. A dollar received by a billionaire like Elon Musk counts the same as a dollar received by a hungry family. This way of counting ignores what economists call the “diminishing marginal utility of income,” the principle that the extra increment in well-being (“marginal utility”) a person gets from an additional dollar declines as a person gets more dollars. In other words, GDP ignores vertical inequalities between rich and poor. It likewise ignores horizontal inequalities among groups defined by race, ethnicity, religion, and other attributes, even though these can feed social tensions and even lead to civil wars.

When? Last, but not least, GDP measures output in the current year without measuring impacts in future years. For example, extraction of non-renewable resources adds to GDP with no offsetting deduction for depletion of our natural assets. The same blind spot applies to activities that destabilize Earth’s climate.

There have been many efforts over the years to devise a better measure. But economic well-being, and human well-being more broadly, are multidimensional. Trying to sum them up with a single metric is a bit like trying to make a straitjacket as comfortable as possible.

C. J. Polychroniou: Isn’t it true, however, that not all well-being is quantifiable?

James K. Boyce: That’s right. Happiness, freedom, justice, and human dignity do not come with numbers handily attached, yet they are vital aspects of our well-being.

C. J. Polychroniou: What about economic growth as measured by GDP and the advance of democracy? Is there a strong correlation?

James K. Boyce: There is a cross-country correlation: countries with higher GDP per capita tend to be more democratic. But this is by no means a one-to-one correspondence. When income and wealth are highly concentrated in the hands of a few, countries tend to be less democratic, even if they have a high average income. The oil-rich states of the Persian Gulf are an example.

When it comes to correlations over time – year-to-year or decade-to-decade changes – the correlation is even weaker. Exhibit One is the recent history of the United States, where democracy has been in retreat even as GDP grows.

C. J. Polychroniou: Several ways of measuring economic health beyond GDP have been proposed, some of which include social and environmental factors, such as the Genuine Progress Indicator (GPI),  and even metrics based on a feminist and decolonial approach.  How likely is it that we can come up with an alternative that can replace GDP given that we are still talking about capitalist economics?

James K. Boyce: Efforts to develop alternative measures are important because, in some ways, measurement is destiny: we measure what we value, and vice versa.

The alternative that has gained the most traction over the years is the Human Development Index (HDI), launched by the United Nations Development Programme back in 1990. HDI assigns equal weight to three components: income (with an adjustment for diminishing marginal impact on well-being as it rises), health, and education. A perusal of HDI rankings is revealing. For example, Portugal ranks a little above Qatar, despite having a per capita income that is only two-fifths as high. The HDI for the United States is the same as that of New Zealand, even though U.S. per capita income is 55 percent higher. Inequalities in the distribution of wealth and power help to explain these striking differences.

The High-Level Expert Group on Beyond GDP, appointed this May by United Nations Secretary-General António Guterres, is the latest attempt to devise alternative measures. Its mission is to help “complement” GDP – which the Secretary-General calls “a harmful anachronism at the heart of global policy-making” –  rather than replacing it altogether.

Whether efforts to measure economic health that go beyond GDP are compatible with capitalism is an interesting question. Different measures are surely compatible with democracy, and democracy has proven able to coexist with capitalism despite the tensions between them. The measure (or measures) that we use to chart economic performance can be regarded as just one locus of these tensions.

Certainly, there is an ideological congruence between capitalism as an economic system and GDP as a measure of performance. The driving motivation in capitalism is to make money, not to advance human well-being. Capitalism’s cheerleaders do not dispute this; they merely claim that improved well-being is a happy side-effect of the pursuit of private profit, invoking Adam Smith’s “invisible hand” (based on a highly selective reading of Smith’s work).

GDP’s exclusive attention to items with a price tag, its neglect of the difference between the value of a dollar to poor people and to billionaires, and its neglect of future well-being – in short, its answers to the what, who, and when questions – map neatly onto capitalist values.

C. J. Polychroniou: Assuming we lived in a socialist society, how would we measure economic well-being and health then?

James K. Boyce: That depends on what one means by socialism. It is worth recalling that the “actually existing socialism” of the Soviet era had a dismal record in terms of both environmental degradation and human freedom. The official measure of economic performance in the Soviet Union and pre-1992 China was “net material product” (NMP), which differed from GDP mainly by excluding non-material services, including health and education. In other words, NMP focused even more exclusively on things rather than people or the planet. That said, NMP growth tracked GDP growth fairly closely.

If, by socialism, instead we mean a society dedicated to the flourishing of human well-being, then I do not think a single measure would suffice. Reflecting the multiple dimensions of well-being – including economic, social, and environmental conditions – we need multiple measures. These would allow us to assess progress (or the reverse) by distinct criteria, rather than assuming that progress on one front (say, economic) adequately compensates for setbacks on another (say, environmental). The question of how to assess mixed results would be a matter for public debate, rather than being swept under the rug by a false equivalence in a mathematical formula.

Let me offer a few thoughts on what this alternative approach would look like: 

• First, we should disaggregate the population to distinguish between those with the lowest well-being (for example, the lowest incomes or worst air quality) and those with the highest.
• Second, in calculating trends over time, we should put greater weight on gains in the strata with lower well-being. (Perversely, GDP does the opposite: a ten percent gain for a person with a ten-thousand-dollar annual income adds only $1000 to GDP, whereas a ten percent gain for a person with a billion-dollar income adds $100 million, even though the impact on human well-being may well be larger in the first case.)
• Finally, the future should not be zeroed out. If greater well-being today comes at the expense of reduced well-being in the future, those losses should be counted, too.

We should not wait for these changes until the end of capitalism. The quest for better measures of economic performance can contribute to efforts to build more successful economies and more democratic societies here and now.

C.J. Polychroniou is a political scientist/political economist, author, and journalist who has taught and worked in numerous universities and research centers in Europe and the United States. Currently, his main research interests are in U.S. politics and the political economy of the United States, European economic integration, globalization, climate change and environmental economics, and the deconstruction of neoliberalism’s politico-economic project. He is a columnist for Global Policy Journal and a regular contributor to Truthout as well as a member of Truthout’s Public Intellectual Project. He has published scores of books and over one thousand articles which have appeared in a variety of journals, magazines, newspapers and popular news websites.  Many of his publications have been translated into a multitude of different languages, including Arabic, Chinese, Croatian, Dutch, French, German, Greek, Italian, Japanese, Portuguese, Russian, Spanish, and Turkish. His latest books are Optimism Over Despair: Noam Chomsky On Capitalism, Empire, and Social Change (2017); Climate Crisis and the Global Green New Deal: The Political Economy of Saving the Planet (with Noam Chomsky and Robert Pollin as primary authors, 2020); The Precipice: Neoliberalism, the Pandemic, and the Urgent Need for Radical Change (an anthology of interviews with Noam Chomsky, 2021); and Economics and the Left: Interviews with Progressive Economists (2021).

Photo by Alesia  Kozik