How to measure our well-being – comment/editorial – How to measure our well-being
July 02, 2008

In its latest report card on the state of the country, the Conference Board of Canada says many of Canada’s problems stem from a lack of innovation. If we were a more creative and forward-looking country, it says, we would not be plagued by such problems as longer hospital wait times, the affordability of social programs, and a poor record on the environment and climate change.

We have no argument with the Conference Board’s view that we need to be more innovative. Nor do we disagree with its claim that innovation spurs productivity growth, which provides the wherewithal to address other problems. But the standard formula the Conference Board relies on – innovation to productivity to wealth creation to problem solving – is basically an economic tautology that excludes the non-economic elements that may be part of the equation. It also implicitly assumes that the potential for innovation is limitless.

The tar sands provide a good illustration of the formula’s first limitation. The development and application of the technology for extracting oil from the tar sands certainly must be regarded as innovative and productivity enhancing, as it creates wealth out of otherwise barren land.

But that economic model fails to consider other elements involved in the tar sands extraction process: namely, the extensive water pollution and greenhouse gas emissions generated with each barrel of oil.

Because our one index of success, gross domestic product per capita, accounts only for the “goods” (the oil) and not the “bads” (water pollution and greenhouse gases), it gives us an incomplete picture of this innovation-productivity-wealth chain. If we had a broader measure of well-being that took account of the bads as well as the goods, we might see things in a somewhat different light.

The Conference Board and other economic think-tanks would say that we aren’t being innovative enough in eliminating these bads. Maybe. But it is also possible that there is not a creative solution to cure every evil, or that implementing it would be so costly as to undermine the entire venture.

A true index of well-being would also measure other “goods” that are not captured by our market-based GDP per capita. It is true, for example, that health-care wait times are longer in Canada than in the U.S., where an MRI can be had on demand. Is the difference just a sign that the Americans are more innovative or technologically adept than we are, or is it a reflection of the fact that only those with the money or insurance can get an immediate MRI in the U.S.? If you could measure the value to society of universal health care, then the points we would get for our social innovation would offset to a degree the points we lose for having longer wait times.

Yes, we need to be more innovative in Canada. But that applies just as much to how we measure well-being as it does to increasing the GDP.

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