This essay presents a new contingent valuation method for measuring quality of life. Individuals were asked the willingness-to-accept (WTA) value of giving up various things for a year. Participants report utility values ten times or higher than expenditures, implying that GDP undervalues the fruits of modern society. It finds that technological progress is undervalued, intangible things are worth more than material goods, and richer respondents have relatively lower utility values.
- A new contingent-valuation method for measuring quality of life is presented. The mainstream GDP approach fails to account for technological progress over time and—as the Stiglitz Commission found—ignores liberty, national security, and health.
- Traditional economic measures are based on value-in-exchange. The new method measures value-in-utility by asking individuals to assess how much cash the average person would be willing to accept to give up various goods and services for a year.
- Fifty-one “super” evaluators participated, selected from a pool of the most accurate evaluators from an earlier contingent-valuation study.
- One hundred and one items were evaluated, including 70 that match data in GDP personal consumption expenditures.
- Utility value of goods and services are nine times higher than expenditures per capita. Because many items are only partial components of GDP categories, that means the utility value is likely twenty times higher than the exchange-value-reported GDP.
- Running water and electricity each had a one-year value of $50,000. Personal computer and internet service were valued at $25,000 apiece.
- Older and poorer respondents had much higher utility value estimates than the norm, by 50 to 100 percent, consistent across categories.