Mismeasuring world growth for 80 years.

• Position: Gross Domestic Product

As the world marks the 80th birthday of gross domestic product--which measures a nation's economic growth--a "Vital Signs" report from World-watch Institute, Washington, D.C., examines its inadequacy as the sole metric for prosperity.

The gross world product is the sum of the GDPs of all countries. This typically includes levels of consumption, investment, government spending, the cost of imports, and the proceeds from exports. Because of various transaction costs, floating exchange rates, and barriers such as tariffs, a metric known as the "purchasing power parity exchange rate" is applied to put purchasing power for different countries on an even footing.

Countries that avoided overleveraging themselves while experiencing robust growth in recent years have had relatively healthier fiscal positions and therefore higher levels of foreign direct investment. This growth was hindered slightly, however, as advanced economies such as the U.S., Japan, and members of the European Union dealt with headline-grabbing crises such as the "fiscal cliff" and the possible breakup of the EU.

Unemployment levels also indicate that, despite continued growth, economic "health" is far from "healthy." According to the UN's International Labour Organization, Geneva, Switzerland, 200,000,000 people around the world are unemployed--about six percent of the global workforce.

Conventional economics regards economic growth as an unalloyed good, necessary to improve human well-being, but it only is a nominal indicator, lacking the many intricacies and more subjective goods that are essential to a more encompassing, holistic, and meaningful metric. Given the disparity of benefits, it is clear that, in and of itself, growth is far from an effective measuring stick.

Newer metrics seek to paint a more comprehensive and accurate picture of humanity's overall welfare. One enhanced and widely cited one is the Genuine...