Production and Welfare: Progress in Economic Measurement

Abstract

While the GDP was intended by its originators as a measure of production, the absence of a measure of welfare in the national accounts has led to widespread misuse of the GDP to proxy welfare. Measures of welfare are needed to appraise the outcomes of changes in economic policies and evaluate the results. Concepts that describe the income distribution, such as poverty and inequality, fall within the scope of welfare rather than production. This paper reviews recent advances in the measurement of production and welfare within the national accounts, primarily in the United States and international organizations. Expanding the framework beyond the national accounts has led to important innovations in the measurement of both production and welfare. (JEL D63, E01, E23, E24, E31, I20)