Is there a new alternative to measure national progress?

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Our professor, Péter Bárczy, Head of Department of Economics talks about Social Progress Index, a new alternative to measure national progress.

Comparison of countries has long been a popular topic for dinner table chat. Everyday people are quick to make subjective comparisons based on their own experiences. Professionals, on the other hand, are not satisfied with casual observations but looking for objective, quantifiable differences.

What is to compare? Macro-economists primarily worry about the economic performance of a system (country, nation, economy). Students of first year introductory modules learn the concept of GDP (the market value of final goods and services produced within a country) that is widely used to assess international differences across countries. Teachers always emphasize that GDP attempts to measure economic performance only and not the overall quality of life. People, on the other hand, are more interested in the latter. They want to know which country is a better place to live today and how this ranking may change over time. Unfortunately, these qualitative differences are rather hard to quantify.

For about a century, statisticians keep trying to compare country-wise differences objectively by creating sophisticated measures and calculating various indexes. These indexes are similar in a sense that they all focus on certain measurable aspects and omit several other parameters. They are different on the other hand, since they all try to capture different aspects of life. A “complete measure” that covers anything and everything that creates a fair and universally accepted ranking of all countries of the world is yet to discover.

A recent innovation in this direction is the Social Progress Index (SPI) that includes 52 different indicators of basic human needs, wellbeing and opportunity. The SPI takes plenty of aspects of life into consideration. It reflects well the development potential, wellbeing and future prospects of a country. It is a pity that basic economic performance is not included at all. The SPI seems to be a complex measure that evaluates plenty of subjective, qualitative aspects of life but excludes wealth and income. Therefore, it is a very useful complement but not substitute of GDP and other traditional measures of economic performance.