The Measure of Economic Welfare (MEW) is an indicator designed to provide a more accurate view of a nation’s wellbeing than traditional national income measures. It was created in 1972 by economists Nordhaus and Tobin to improve upon GDP as a way to track social health.

MEW makes several key adjustments to traditional data:

• Adds the value of leisure time and household production, such as goods and services created for personal use.
• Subtracts defensive expenditures, which are costs spent only to fix social problems or environmental damage, such as pollution clean-up.
• Subtracts the loss or depreciation of natural resources and the environment.
• Adjusts for how income is distributed across the population.

Why it matters:

GDP traditionally counts all production as positive, even harmful activities like pollution or crime. MEW attempts to separate activities that truly improve life from those that simply fix negative outcomes.

Limitations:

Assigning a monetary value to things like leisure time is subjective. Because it relies on debated assumptions, MEW can be difficult to calculate consistently across different countries.