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Gross domestic product (GDP) is an indicator of a nation's economic health that measures the market value of all the goods and services it produces. The U.S. government has used the GDP for many years to assess the national standard of living, but today many countries are looking for more accurate alternatives. The recent global financial meltdown and continuing economic weakness have shown all too clearly how little correlation there really is between a nation's GDP and the quality of life or even the standard of living of its citizens.

For one thing, the GDP lumps together all private consumption, investment, government spending and value of exports and imports, without any indication of how these sources of wealth are distributed across the population. The gap between rich and poor in the U.S. today is wider than it's been since the Gilded Age of the 19th century, and unemployment is approaching Great Depression levels. The federal deficit is also at historic highs. More than 50 million Americans have no health care insurance and many others find their coverage doesn't protect them from bankruptcy when serious or chronic health problems eat up all their life savings. Millions of working and middle class families, even entire neighborhoods in some cities and regions, have been devastated by the foreclosure crisis.

None of these indicators of a weak and dysfunctional economy are well reflected in the GDP; it doesn't tell us much about the actual quality of life of average Americans.

Some alternative measures being considered by many governments do incorporate these issues of income inequality and intangible factors in standard of living:

*The Human development index (HDI): factors in life expectancy and education levels with GDP.

*The Index of Sustainable Economic Welfare (ISEW): adjusts GDP data for income distribution, and quality of life factors such as crime and pollution.

*The Gini coefficient: measures disparity of income within nations.

*Wealth estimates: combines monetary wealth with human and environmental capital.

*Private Product Remaining (PPR): deducts government spending and surpluses from federal taxes.

Other measures of economic health and progress are focused more broadly on the quality of life and the well-being and health of individuals and communities:

*The European Quality of Life Survey, first published in 2005, collects data on the subjective measures of life satisfaction among Europeans.

*Gross national happiness is a measure being developed by the Centre for Bhutanese Studies in Bhutan that hopes to measure "national happiness" in areas such as living standards, health, educational opportunities, environmental health, cultural vitality, governance, and the balance, vitality, and well-being of communities and individuals. The Centre views these indicators as the nation's true priority over GDP.

*The Happy Planet Index (HPI) is intended to assess the balance between human well-being and the health of the environment. Introduced as an alternative to the GDP by the New Economics Foundation in 2006, the HPI assesses the environmental efficiency, defined by the society's ecological footprint, with which a nation achieves the well-being of its citizens (measured by life expectancy and more subjective life satisfaction ratings).

Using one of these measures to evaluate our national progress would give us a much more sensitive assessment of our nation's true progress - one that reflects the well-being and quality of life of the American people rather than just the monetary wealth of the nation.

Learn more about this author, Dorothy Hoffman.
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