The amounts involved are not nickel-and-dime stuff. Hurricane Katrina produced something like $82 billion in damages in New Orleans, and as the destruction there is remedied, G.D.P. goes up. Some of the remedial spending on the Gulf Coast does represent a positive change to economic well-being, as old appliances and carpets and cars are replaced by new, presumably improved, ones. But much of the expense leaves the community no better off (indeed, sometimes worse off) than before.

Image Credit... Nicholas Felton

Consider the 50 miles of sponge-like wetlands between New Orleans and the Gulf Coast that once protected the city from storm surges. When those bayous were lost to development  sliced to death by channels to move oil rigs, mostly  gross domestic product went up, even as these “improvements” destroyed the city’s natural defenses and wiped out crucial spawning ground for the Gulf Coast shrimp fishery. The bayous were a form of natural capital, and their loss was a cost that never entered into any account  not G.D.P. or anything else.

Wise decisions depend on accurate assessments of the costs and benefits of different courses of action. If we don’t count ecosystem services as a benefit in our basic measure of well-being, their loss can’t be counted as a cost  and then economic decision-making can’t help but lead us to undesirable and perversely un-economic outcomes.

The basic problem is that gross domestic product measures activity, not benefit. If you kept your checkbook the way G.D.P. measures the national accounts, you’d record all the money deposited into your account, make entries for every check you write, and then add all the numbers together. The resulting bottom line might tell you something useful about the total cash flow of your household, but it’s not going to tell you whether you’re better off this month than last or, indeed, whether you’re solvent or going broke.

BECAUSE we use such a flawed measure of economic well-being, it’s foolish to pursue policies whose primary purpose is to raise it. Doing so is an instance of the fallacy of misplaced concreteness  mistaking the map for the terrain, or treating an instrument reading as though it were the reality rather than a representation. When you’re feeling a little chilly in your living room, you don’t hold a match to a thermometer and then claim that the room has gotten warmer. But that’s what we do when we seek to improve economic well-being by prodding G.D.P.

Several alternatives to gross domestic product have been proposed, and each tackles the central problem of placing a value on goods and services that never had a dollar price. The alternatives are controversial, because that kind of valuation creates room for subjectivity  for the expression of personal values, of ideology and political belief.

How, after all, do we judge what exactly was the value of the services provided by those bayous in Louisiana? Was it $82 billion? But what about the value of the shrimp fishery that was already lost before the hurricane? What about the insurance value of the protection the bayous offered against another $82 billion loss? What about the security and sense of continuity of life enjoyed by the thousands of people who lived and made their livelihoods in relation to those bayous before they disappeared? It’s admittedly difficult to set a dollar price on such things  but this is no reason to set that price at zero, as gross domestic product currently does.