“Environmentalists believe it leads to an overemphasis on growth at the expense of the planet, “happiness” advocates think it needs to be replaced with indicators of genuine well-being, and activists such as those in the Occupy movement argue that a focus on GDP has disguised inequality and social disharmony.”

GDP gets used a lot, in almost any discussion of politics or economics. It’s easy to forget it’s a recent phenomenon: the idea dates back only to the 1940s, and as recently as 1985, we really only had GDP data for around 60 countries, and that of poor quality. Only in 1999, when Angus Maddison published long-run estimates, did we actually get long-run GDP data on most countries, and even those are limited.

Today it is the rod by which all else is measured. As Diane Coyle points out, however, it is also deeply limited – some would say flawed. It counts some major sectors poorly, such as services, and omits others, such as household work: if a woman marries her gardener and stops paying him, GDP falls. The current system also gives a vast estimate of the contribution of financial services to the economy, giving that sector tremendous political influence, as in the UK: it’s not clear this estimate is reasonable, since in some ways it measures how much risk they bear, not how much value they are creating.

What’s the solution? Coyle argues that attempts to replace GDP with a new single metric won’t work: whether it’s happiness or inequality, no single number can capture the complex mix of freedom, prosperity, fairness, and the human capability to innovate and create that we believe is important. Instead, she suggests we use a dashboard approach: that using a mix of indicators allows us to measure how we are doing in a number of areas, and to tradeoff one against the other as necessary.

A sensible idea, in a sensible, well-written book. I’ve met Diane personally, and her personality shines through clearly in her writing: data-driven, clearly analyzed, and well-researched. The history of GDP may never be a summer thriller, but the book is about as light as it could be, and it covers and important and interesting topic.