The purpose of society is to improve the quality of life of its participants beyond what they could achieve alone. In my view, the objective of society is to maximise the aggregate quality of life of its members. The efficiency of society is a measure of how well it achieves this objective.
Basis of society
If humans lived a life completely ignoring other humans, few of us would survive. We would spend all our time struggling to get enough food to last throughout the year, providing enough even during the barren winters. We would spend a great amount of time protecting ourselves from wild animals. And we would be very hopeful we did not succumb to broken limbs, infections or disease. They would be close to impossible to survive if we still had to gather food and keep our living quarters secure.
Society is people living and working together. We do it to achieve more together than we could ever hope to alone. There are two key aspects to society. One is the very human way we behave with each other, the relationships we have and attitudes we adopt. The other is the way we structure ourselves and resources to produce. It is the mix of our behaviours and resource allocations that determine how effective society is.
The problem is that we have not evolved as architects of society. We are not endowed with the skills to know as a matter of certainty the best way to organise our social or productive structures to maximise our aggregate quality of life. We have evolved many social skills. In fact, our social skills are astoundingly advanced in many respects. We can tell someone's mood just by the slightest glimpse of their face. The slightest increase in how wide the eyes open, the tiniest inflection of the forehead and eye brows, the tension of the lips. We are supremely and instantly tuned in to facial and other expressions, to people's body language. We know if we are upsetting people or pleasing them. We are well equipped to achieve harmony with one another, even as we toil together. But we are also equipped to compete with one another, to be aggressive, to fight to dominate. How are we supposed to blend the hugely complex characters and vastly different circumstances of 60 million people with one another, to maximise our social fulfilment?
Evolution has left us even less equipped to know how to organise our productive structures. We have fantastic powers of deduction, and we have almost perfected the technique of learning through trial and error, except where we are too stupid to accept in others the error component. But we are sorely lacking in some really basic skills, such as a reliable measure of the needs and desires of one person relative to another, or the ability to predict outcomes with accuracy, or the ability to quantify usefully and consistently how much someone else likes what we are producing.
How can we hope to allocate resources optimally, when we struggle so much to know what optimal looks like? Many of the decisions we take on how we can best structure society are impossible to assess. We do not know how to handle decisions that produce mixed consequences, where the value of the net effect depends on the perspective from which the decision is viewed.
Measuring an Economy
In today's hugely complex, advanced and sophisticated society, most of us measure an economy's success by its total output. We seek to maximise GDP, we have no measure for the economy other than GDP and we have no measure for GDP other than money. Everything that is outside the realms of money is "translated" to its monetary equivalent, in any arbitrary way that the translator deems fit. Yet GDP ignores the entire plank of society's human aspect, its relationships and attitudes, that are so determining to our sense of security and belonging.
The two key problems of using GDP are these. Firstly, money attempts to measure how much we value things - and we are useless at valuing things. Different people have different values for the same item. There are just too many things we can not value. How much is our health worth? How much better off have we become with the advent of the iPod compared to the Walkman? Assuming that money has an absolute value is misguided, so the entire basis of money as a measure of success is flawed. Secondly, GDP takes no account of the spread of money within society. In the US, almost the entire growth of GDP between 1980 and 2010 has ended up in the pockets of a handful of billionaires. Each extra million dollars wealth to a billionaire has very little impact on their overall quality of life. The huge majority of people jealously watch the rich get richer, whilst the gains of technological advance have entirely passed them by. Even before the 2008 economic crash, GDP has grown by 20%. Aggregate quality of life had probably dropped.
Are there alternatives to measurement of achievement of society to an arbitrary monetary valuation of total output?
Yes. We need measure the quality of life. We need identify what determines quality of life, and measure its drivers. The objective is to establish a measure of success, and to develop new and more useful tools for government and members of society to achieve greater success in terms of aggregate quality of life.