Beyond Financial Metrics: Redefining Economics for Human Wellbeing

 Beyond Financial Metrics: Redefining Economics for Human Wellbeing

Rahul Ramya

17.01.2025, Patna, Bihar

Economics, as traditionally taught and practiced, has long been centered on financial metrics—GDP, per capita income, and trade balances—to assess a country's progress. However, these measures often overlook the most critical dimension of progress: human wellbeing. Here we explore the limitations of financial metrics and argues for a paradigm shift towards an economics that prioritizes human development, freedom, and societal wellbeing.

Limitations of Financial Metrics

Financial indicators such as GDP per capita and stock market indices offer a narrow view of societal progress. These metrics, while useful for measuring aggregate economic activity, fail to capture disparities in wealth distribution, environmental degradation, and social inequalities. For instance, rising GDP might coincide with worsening income inequality or environmental collapse, as observed in some rapidly industrializing economies.

Consider India, where Uttar Pradesh often outperforms Kerala in GDP growth. Yet, Kerala consistently ranks higher in human development indices (HDI), showcasing better healthcare, education, and gender equality. Similarly, global comparisons reveal how countries with high GDP per capita, such as the United States, still grapple with stark income inequality and inadequate social safety nets.

Economics of Human Freedom

Amartya Sen's capability approach shifts the focus from economic growth to expanding human freedoms. Freedom, in this context, is the ability to lead a life one values. It encompasses access to quality healthcare, education, clean air, and meaningful employment—factors often excluded from financial metrics. For instance, Scandinavian countries prioritize social welfare, achieving high HDI scores without compromising economic stability.

In contrast, regions like sub-Saharan Africa and parts of South Asia highlight the human cost of development focused solely on financial metrics. The lack of access to basic amenities like clean water and education perpetuates poverty cycles, regardless of GDP growth rates.

Contrasting Global Examples

The divide between the Global North and South illustrates the shortcomings of financial metrics. For example, Vietnam has transitioned from a war-torn economy to one emphasizing inclusive growth, prioritizing education and rural development. Similarly, New Zealand’s Wellbeing Budget redefines economic priorities, allocating resources to mental health, child poverty reduction, and climate change.

Even within the Global South, striking contrasts emerge. Bangladesh, despite limited resources, has excelled in women’s empowerment and healthcare. Brazil, with abundant natural wealth, often struggles with inequality and political instability due to misplaced economic priorities. These examples underscore the need for an economics that transcends financial metrics.

The Indian Context: A Case Study

India offers a microcosm of these challenges. States like Kerala demonstrate how investments in human capital yield long-term benefits. High literacy rates and robust public healthcare systems have propelled Kerala’s HDI rankings. Conversely, Gujarat, despite impressive industrial growth, faces challenges in social indicators like healthcare access and child nutrition.

Recent Indian policies highlight the potential of integrating human wellbeing into economic frameworks. The Ayushman Bharat scheme (PMJAY) aims to provide universal healthcare, while digital platforms like e-Shram target the informal workforce. These initiatives, though nascent, signal a shift towards inclusive development.

Beyond Wealth: Time and Environmental Wealth

Time wealth—the availability of time for leisure, family, and personal growth—is an often-overlooked dimension of wellbeing. Developed nations like Germany emphasize work-life balance through policies like shorter workweeks and extended parental leaves. India, with its burgeoning gig economy, must address the erosion of time wealth to ensure sustainable growth.

Environmental wealth is another critical metric. Bhutan’s Gross National Happiness Index incorporates environmental conservation, ensuring that development aligns with ecological sustainability. In contrast, unchecked industrialization in regions like the Amazon rainforest exemplifies the devastating cost of prioritizing financial metrics over environmental health.

Regulated Free Markets and Inclusive Growth

Balancing market freedoms with regulations is crucial for equitable development. Germany’s social market economy exemplifies this balance, blending innovation with social welfare. Conversely, China’s centralized model achieves rapid industrialization but often curtails individual freedoms, highlighting the trade-offs of different economic systems.

India’s digital public infrastructure, including UPI and Aadhaar, demonstrates how technology can democratize access to services. However, bridging digital divides remains critical to ensure these advancements benefit all sections of society.

Redefining economics to prioritize human wellbeing requires a shift from financial metrics to multidimensional approaches. Freedom-centered economics, as advocated by Amartya Sen, offers a path to holistic development. By integrating dimensions like time wealth, environmental sustainability, and social capital, nations can achieve progress that is inclusive, equitable, and sustainable. The examples of Kerala, Vietnam, New Zealand, and Germany underscore the transformative potential of this paradigm. As we navigate the complexities of the 21st century, the ultimate measure of progress must be the wellbeing of people, not just the wealth of nations.