Going downhill

The formula for calculating GPI, for instance, starts with personal consumption expenditures, a major component of GDP, but makes several crucial adjustments. First, it accounts for income distribution. It then adds positive contributions that GDP ignores, such as the value of household and volunteer work. Finally, it subtracts things that are well-being-reducing, such as the loss of leisure time and the costs of crime, commuting and pollution.

While the U.S. GDP has steadily increased since 1950 (with the occasional recession), GPI peaked about 1975 and has been relatively flat or declining ever since. That's consistent with life-satisfaction surveys, which also show flat or dropping scores over the last several decades.

This is a very different picture of the economy from the one we normally read about, and it requires different policy responses. We are now in a period of what Daly -- a former World Bank economist now at the University of Maryland -- has called "uneconomic growth," in which further growth in economic activity (that is, GDP) is actually reducing national well-being.

How can we get out of this 33-year downturn in quality of life? Several policies have been suggested that might be thought of as a national quality-of-life stimulus package.

To start, the U.S. needs to make national well-being -- not increased GDP -- its primary policy goal, funding efforts to better measure and report it. There's already been some movement in this direction around the world. Bhutan, for example, recently made "gross national happiness" its explicit policy goal. Canada is developing an Index of Well-being, and the Australian Treasury considers increasing "real well-being," rather than mere GDP, its primary goal.

Once Americans' well-being becomes the basis for measuring our success, other reforms should follow. We should tax bads (carbon emissions, depletion of natural resources) rather than goods (labor, savings, investment). We should recognize the negative effects of growing income disparities and take steps to address them.

International trade also will have to be reformed so that environmental protection, labor rights and democratic self-determination are not subjugated to the blind pursuit of increased GDP.

But the most important step may be the first one: Recognizing that the U.S. is mired in a 33-year-old quality-of- life recession and that our continued national focus on growing GDP is blinding us to the way out.