Sept. 13 (Bloomberg) -- Joseph Stiglitz, the Nobel Prize- winning economist, urged world leaders to drop an obsession with examining gross domestic product and focus more on broader measures of prosperity.

“GDP has increasingly become used as a measure of societal well-being and changes in the structure of the economy and our society have made it increasingly poor one,” Stiglitz said in an interview today in Paris.

The remarks reflect Stiglitz’s study of the issue for French President Nicolas Sarkozy, who commissioned a report at the beginning of 2008 after the onset of the financial crisis. Stiglitz and other contributors to the report will present their results tomorrow in Paris at a daylong conference hosted by Sarkozy and attended by Finance Minister Christine Lagarde.

Sarkozy isn’t alone in questioning current gauges of wealth. Barack Obama raised the issue during his campaign for the U.S. presidency and David Cameron, leader of the U.K.’s Conservative Party, has called for thinking about “general well-being” instead of just output.

A year after the collapse of Lehman Brothers Holdings Inc. forced governments to pump billions of dollars into banks to shore up the financial system, Stiglitz said that broadening the range of statistics considered by governments is vital as they grapple with reviving the world economy and limiting climate change.

“So many things that are important to individuals are not included in GDP,” said Stiglitz, a Columbia University professor. “There needs to be an array of numbers but we need to understand the role of each number. We may not be able to aggregate everything together.”

Government’s Contribution

Assessing government’s contribution to economic output, which ranges from 39 percent in the U.S. to 48 percent in France, is one of the shortcomings of the GDP model, as is its difficulty in estimating improvements in quality of products such as cars instead of just quantity, Stiglitz said. Similarly, increased household debt may drive up output numbers, whereas that doesn’t amount to a real increase in wealth, he added.

While Stiglitz doesn’t recommend dropping GDP altogether, he wants governments to consider such matters, along with issues of environmental sustainability, in policy making.

“Most governments make a fetish out of it. If you take one message out of our report, make it avoid GDP fetishism,” he said. “The message is to encourage political leaders away from that.”

Stiglitz, a former chief economist for the World Bank and member of the White House Council of Economic Advisers, is also confident that the world will move in that direction.

“This information is important because it affects how you make decisions,” he said. “The approach will get greater and greater acceptance over time.”

To contact the reporters on this story: Mark Deen in Paris at markdeen@bloomberg.netDavid Tweed in Paris at dtweed@bloomberg.net

Last Updated: September 13, 2009 12:47 EDT