In the present study, I put forward an analytical framework that aims to improve significantly our capacity to compare economic impacts of policy alternatives at the level of individual households. The objective is to have a quantitative and internally consistent method capable of assessing any kind of policy affecting the economic wellbeing of individual households. In such a broad, yet quantitative, framework, I propose to use as a proxy of economic wellbeing the household’s net worth computed on a comprehensive household balance sheet. Furthermore, I argue that traditional GDP measures can be derived from this view in a consistent manner, which would in turn facilitate both the improvement and the reuse of current macroeconomic aggregates. The contract view, replacing the fiction of atomistic and anonymous markets, is much better equipped for modelling all kinds of economic trade, non-market and market, even in such policy areas as fundamental rights where the absence of observed volumes and prices has proven a formidable barrier to measurement within the traditional economic measurement framework. I introduce two basic non-market risk insurance mechanisms, rights and entitlements, and discuss their tradeoffs with market-based insurance. Finally, I note that GDP will correlate, in general, with alternative measures for wellbeing because income flows driving GDP are observationally equivalent for an arbitrary number of populations of household balance sheets. As a result, such correlation cannot, and should not, be used as evidence for GDP properly measuring economic wellbeing.

The views presented are those of the author and do not represent or anticipate official views of the European Commission.