Gross domestic product has failed as an indicator of either national progress or individual happiness.
That’s quite probably because it is not a measure of national progress or individual happiness. It measures the value of goods and services produced over a particular time period. Pointing out, as Edgar does, that ‘GDP goes up with increased spending on crime, natural disasters’ is true but a silly criticism. We would be better off if crime and natural disasters did not occur, but spending on them usually leaves us better off than we would be if we did nothing (the ‘gross’ is intended to explain that no account is taken of capital depreciation, or destruction in the case of crime and natural disasters).
GDP clearly cannot be taken as equivalent to national progress or individual happiness. But one reason that it is a very useful statistic is, as Will Wilkinson points out, that it correlates with other statistics that get closer to progress, such as levels of health and education.
Up to a point, GDP correlates with happiness (there is a debate about how much extra happiness more GDP delivers to already rich countries; the current empirical evidence suggests a small amount). It also correlates with the employment level, the decline of which is a major negative for numerous objective and subjective measures of well-being.
Another reason that GDP is a useful statistic is that policymakers can to some extent increase or decrease it. We talk about budget deficits or surpluses and interest rates a lot because these have observable effects. By contrast, there are no easy policy levers to pull that directly influence subjective well-being.
Edgar prefers composite well-being indicators. These are in my view intellectual junk (the happy planet index being a particularly bad example). Though the underlying data series are usually valuable, combining them is not. There are serious problems of incommensurable measures and tendentious value judgments in what to include and what weight to give the different indicators.
GDP certainly doesn’t tell us all we need to know. But unlike composite well-being indicators, it does tell us useful things.