Is financial wealth our most important asset?
We’ve written before and will continue writing about alternatives to GDP such as the Bhutan Gross National Happiness index, the Happy Planet Index (Time Magazine, Jan ’10) and France’s recent decision to include well-being indicators in national accounting (WSJ, Sept 09).
Not to beat a dead horse, we’ll let Nobel prize-winning economist Joseph Stiglitz summarize the basic argument for us: “National income statistics such as GDP and gross national product were originally intended as a measure of market economic activity, including the public sector. But they have increasingly been thought of as measures of societal well-being, which they are not. Of course, good statisticians have warned against this error. Much economic activity occurs within the home – and this can contribute to individual well-being as much as, or more than, market production.” (in the Financial Times, Sept 09)
The conference this week in D.C. on metrics and evaluation of the social impact of investing (Global Impact Investing Network, put on by the Aspen Network of Development Entrepreneurs) put us in a data-crunching mood. We decided to ask ourselves a simple question: how well does GDP correlate to Well-Being indicators in the U.S.?
Thanks to data from the Bureau of Economic Analysis and Gallup, we were able to compare the two side-by-side for metropolitan areas of a decent size. We were most interested in anomalies; places with similar scores on well-being indicators but different GDP, or vice versa.
Here’s a fun one from running that comparison; Boulder Colorado (home to the University of Colorado) and Provo/Orem Utah (home to BYU), have 2 of the highest scores on the Gallup composite well-being survey. Yet the per-capita GDP of Boulder is $56,396, versus $21,345 in Provo/Orem. This difference somewhat increases when cost of living is considered, and decreases when median household income is considered instead of per-capita GDP.
There are also other anomalies with high ratios of reported well-being compared to per capita GDP, including:
- Lake Havasu City/Kingman, AZ
- Prescott, AZ, and
- Ocala, FL.
To all of you data-loving, impact investing or economics geeks out there. Any theories to help explain these anomalies? What are these places doing to achieve greater well-being more efficiently (in terms of economic cost) than other cities in the U.S.?