Economists and policymakers often rely on gross domestic product to assess economic performance, but they should also incorporate broader indicators that consider people and the planet, Nora Lustig said during an April 22 talk at the University of Notre Dame.
Lustig visited campus for the Joseph E. Stiglitz Lecture on Inequality and the Good Society. The series, presented by the Keough School of Global Affairs, highlights outstanding scholars who provide research and policy insights on economic and social inequality.
Lustig drew on her expertise as a researcher focusing on economic development, inequality and social policies, with emphasis on Latin America. She also highlighted her work as co-chair of the United Nations High-Level Expert Group on Beyond GDP. Lustig underscored how gross domestic product alone provides an incomplete compass for navigating 21st-century challenges such as climate change, persistent inequality and declining institutional trust.
“The issue with GDP is that it’s a measure of economic activity, not well-being,” said Lustig, a professor at El Colegio de México, A.C., and emeritus faculty member at Tulane University, where she founded the Commitment to Equity Institute. That narrow scope helps explain why economic discussions emphasize aggregate growth rather than how systems and structures affect everyday people, she said.
“GDP ignores inequality and poverty,” Lustig said. “It does not capture environmental degradation. It misses non-monetary dimensions of well-being, like health, education and peace. It's been blind to violence and repression. It counts harmful activities like the disruption of forests as part of positive outputs. And it excludes unpaid work.”
Because growth is necessary but not sufficient for measuring progress, Lustig said, the solution is to supplement GDP so it is not used as the sole measure of progress. With that in mind, the U.N. group she co-chairs has developed a set of approximately 30 indicators to address this gap.
The goal, Lustig said, is to provide a broader view that prioritizes well-being, equity and inclusion, looks at the environmental impact of economic activity and considers the future as well as the present.
The indicators proposed by the U.N. High-Level Expert Group were developed in consultation with many stakeholders, Lustig said. Some draw from the U.N. Sustainable Development Goals, an existing and widely consulted set of global metrics.
At the individual level, the indicators gauge material conditions, work, health, education, security, quality of institutions and subjective well-being (including a sense of hope and purpose). They also examine social fabric and social capital (including belonging and support) as well as peace and governance. On an ecological level, they consider whether people are living in a safe and sustainable environment, with a focus on the quality of the air, water, soil and overall biodiversity.
In addition to the dashboard, Lustig recommended implementing a multidimensional composite indicator — a single measure that combines multiple indicators to provide a more complete picture. She said it would enable policymakers, governments and multilateral organizations to assess changes over time and across countries. This would help them design more effective interventions to address deprivations and inequality, she said.
“We want to go beyond averages,” she said. “We want to go beyond the present. And we also want to think about going beyond national borders, given the environmental spillover effects and their impact on the rest of the world.”
Highlights: Lustig on addressing inequality
Economist Nora Lustig explains what the data reveals about inequality and what roles universities can play in addressing the issue.