Question

would the governemnt make policy decisions and choose to spend money differently if the measured levels of development based on economic indicators instead of on peoples well being​

Answer 1

In the real world, they already making policy and spending decisions based on economic development.

If they spent money and made policy based on the general well-being of the people it would be spent much differently. No money would be going to foreign aid, CRT, etc. Less money would go to the military,  politicians, dangerous science experiments, etc. More money would go towards real infrastructure like roads, rails, waterways, border security, and so on. Finally, policy decisions wouldn't isolate the public and instead, it would be to the benefit of the lower class.