If it could be shown that rising GDP is associated with rising levels of anxiety, would you favor deducting psychological costs to obtain the true value of GDP?
Thanks for your very interesting question. GDP measures the market value of production. It is not intended to be a measure of aggregate well-being but it is often used as such. Economists generally recognize that GDP is an imperfect indicator of well-being, or happiness, and there are serious efforts underway, by international institutions, such as the OECD, and governments, such as the government of France, to devise better measures of well-being that go beyond GDP. The recent Nobel prize winner, Angus Deaton, is famous for his research on growth and happiness.
The list of potential variables to take into account is large: leisure, consumption, health, longevity, education, inequality, employment and unemployment, family circumstances, the environment, etc. To the extent of my knowledge, “levels of anxiety” has not been proposed so far.
Economists would probably agree that levels of anxiety, or stress, affect well-being but many would be skeptical of changing the definition of GDP. One argument is that GDP is not intended to measure well-being but just the level of economic activity. They may agree on considering alternative indexes of well-being for purposes of policy evaluation. The key controversial issue would be on how to properly measure the economic loss associated to anxiety, or its shadow price. But, yes: I would favor deducting psychological costs to properly assess well-being and its evolution.