The Economics of a Good Life

by Terence Jeyaretnam

“Our gross national product….contains air pollution and cigarette advertising and ambulances to clear our highways of carnage…..it counts special locks for our doors and the jails for the people who break them. It counts for the destruction of the redwood and the loss of our natural wonder in chaotic sprawl…yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play”

– Robert F. Kennedy, Presidential campaign trail, 1968.

After several decades of feverish economic activity and wealth-creating growth, the global financial crisis has re-opened the cold case of whether the type of economic activity and associated policies are appropriate into the future. Global ‘occupy’ movements have seen the next generation take to the streets to protest against the band aids being applied to the current economic paradigm. While the US and Europe have faced significantly more criticism and as a consequence are more deeply navel-gazing, Australia is not immune to the significant questions being posed, such as 1. Do we currently measure economic activity appropriately? 2. Can we continue to sustain uncontrolled growth? 3. Are there better ways to define and build real prosperity now and into the future? 4. how do we begin a transition to a more sustainable path for the global society?, and my favourite, 5. Why do we sing ‘happy birthday’ celebrating extension of life, and yet not reflect it in measuring progress?

Not many would know that our Federal Treasury does indeed work to a wellbeing framework. In Treasury’s own words, in its mission, Treasury takes a broad view of wellbeing as primarily reflecting a person’s substantive freedom to lead a life they have reason to value. This view encompasses more than what is directly captured by commonly used measures of economic activity. In a recent speech, Dr. Martin Parkinson, Treasury Secretary, outlined the wellbeing framework as being based on five dimensions that directly or indirectly have important implications for wellbeing and are particularly relevant to Treasury. The dimensions are 1) the set of opportunities available to people, including health and environmental amenity; 2) the distribution of those opportunities across the Australian people; 3) the sustainability of those opportunities available, maintained or enhanced for current and future generations; 4) the overall level and allocation of risk borne by individuals and the community; and 5) the complexity of the choices facing individuals and the community, including transparency in trade-offs made.

This framework illustrates Treasury’s acceptance of two well-known issues with GDP (Gross Domestic Product) as a measure being that a) it is a faulty measure and other measures can better measure progress b) it does not account for durability and future generations. The question then is why do we continue to run our country, businesses and build communities using the wrong metric? I advocate re-opening this debate contributing externally through such forums as the Australian National Development Index and United Nation’s Human Development Index.

After all, a good life is worth measuring.

Terence Jeyaretnam is a Director of Net Balance (terence@netbalance.com), 
one of the world’s leading sustainability advisory firms.
Terence is based in Melbourne.