Replacing the gross domestic product (GDP) with another measure of economic output holds distinct advantages, says the World Bank former chief economist and Nobel Prize winner, Joseph Stiglitz.
The GDP could be "a misleading indicator" for countries trying to measure their economic success, Stiglitz told delegates at the Australian Economic Forum in Sydney.
"The longest standing conceptual framework thinking about this issue is in Butan where a young king over 30 years ago announced the GDP was no longer important and transformed their GDP into GNH -- gross national happiness," Stiglitz said.
The GDP was adopted internationally to create greater globalisation, but it hasn't been a positive measure of output in the long term, said the former economic adviser for both the Clinton administration and French president Nicolas Sarkozy, adding his views have often received negative responses.
"I figured out I was doing something important when I got enormous negative resistance from Congress," he said. "There's a sort of irony here. The international community switched from one commonly-used metric. Before 1990, the standard measure was not GDP, which focuses on what is produced in a country -- it was the income received by the people in that country.
"Many of the problems have become much worse. Using a GDP as a measure of income has had a more damaging impact," he said.
Stiglitz keynote at the forum was part of the final leg of his Australian tour. He said the GFC of 2008 was caused in part by the manipulation of the GDP and the banking sector.
"Our banks were very creative in deceptive accounting. They were creative in moving things off balance sheets so they could get their profit up and have the risk off those balance sheets. It worked well, especially for CEOs," he said.
"Our GDP was bloated by fictitious numbers and our European counterparts believed these. It affected the way we thought about policies. Market prices didn't affect what was really going on in the economy.
"This led to not only distorted incentives, but was a distorted investment in how companies were doing."
The passionate economist said he was excited to be asked to be part of the report on the measurement of economic performance and social progress, commissioned by French prime minister, Nicolas Sarkozy.
The study centred on how effective the GDP was in measuring economic output and found that income wasn't the only thing the French saw as driving the economy.
"When the national income statisticians came out and said 'GDP per capita has gone up 3 per cent', most of the citizens actually felt worse off. Income is only one of the things we care about. We care about leisure, our workplace and other things. Large bodies of research have focused on people's wellbeing. Now we have tools that assess how we do things better, it has become a good tool for economists.
"There are marked changes in leisure over time and much of the difference between GDP per capita is based on hours worked. If your measure is GDP, you're encouraging people to work more and more as opposed to leisure which is based on goods," he said.
Other topics discussed at the forum included the important connection between the economy and technology, and a discussion around what Australia's economy will look like in 2025.