An analysis of alternative objective measures of economic performance and social development.

The measurement of economic performance and social development has become increasingly important as societies have evolved and become more complex. At present nations do not only seek to improve economic performance but are also compelled to improve social development through improvements in socially and environmentally sustainable initiatives. Traditional measures such as Gross Domestic Product (GDP) which is derived from United Nations’ System of National Accounts (SNA) have been criticised given the inability to adequately account for these social and environmental aspects of social development. Given these perceived deficiencies in the conventional measures, several alternative objective measures have been proposed in an attempt to address these shortcomings. Therefore the primary aim of this study is to analyse, via a literature survey, these alternative objective measures of economic performance and social development. The alternative measures that constitute the survey are the Index of Sustainable Economic Welfare (ISEW), the Genuine Savings (GS), and the United Nations’ Human Development Index (HDI). Upon the completion of the literature survey, sustainable development theory is used to evaluate the extent to which the National Accounts and the alternative objective measures are consistent with Hicksian and Fisherian definitions of income and capital, which embody the concepts of sustainability and sustainable development. The evaluation reveals that the National Accounts neither conform to the Hicksian nor the Fisherian definitions of income, thus could not be viewed as a measure of sustainable income. It is found that the ISEW is consistent with the Fisherian definition of income and is also a partial indicator of sustainable development. The evaluation of the GS measure reveals that it is consistent with the Hicksian definition but not the Fisherian definition. In terms of overall sustainability, it is argued that GS is a partial measure of weak sustainability. The HDI is similar to the National Accounts, in that it is neither consistent with the Hicksian nor the Fisherian definitions of income and is also not a measure of sustainability. In summary, the study demonstrates that despite GDP's shortcomings as a measure of economic performance and social development, currently, there is no alternative approach which simultaneously addresses every flaw in GDP. However, all the alternatives yield a much better approximation of social development than GDP