GDP and profit currently dominate society’s discussions of economic performance. They shape the way people think about the economy and business, affecting their behaviour and the actual outcomes of economic activity.
ICAEW’s thought leadership project ‘So what is economic success? Going beyond GDP and profit’ will explore what we mean by economic success, the role that GDP and profit play in this, and the potential for broader measures of economic success to help us balance our economic priorities, our social goals, and the constraints imposed on us by the natural environment we live in.
The diagram below maps out the questions we are considering and our brochure provides more background. The digital version of the brochure is designed for viewing on a computer or tablet. If you want to print a copy, please use the printable version instead.
Two of the most-used measures of economic success are currently GDP at the national level and profit at the organisational level. GDP is a value-added measure that is broader than profit.
To assess the suitability of measures of economic success, we first need to clarify what we are trying to measure. What does a ‘successful’ economy look like and how do individual entities contribute to this success?
GDP and profit are contested concepts that are subject to ongoing refinement. They are defined and calculated using extensive rules, processes and practices, including the system of national accounts and financial reporting standards.
As material living standards improve and the natural environment increasingly becomes a limiting factor in economic activity, it is time to re-assess current measures in light of our definition of economic success.
Comparing the strengths and weaknesses of national and organisational accounting systems will identify lessons these systems can learn from each other and areas where there may be scope for common improvements.
Alternatives to GDP and profit already exist. Their appropriateness and usefulness can be assessed with reference to our definition of economic success. Should these measures be more widely used and/or are new measures needed?
Throughout the project we will be considering cross-cutting questions such as: