Techdirt Reading List: GDP: A Brief But Affectionate History

from the i-wouldn't-be-quite-so-affectionate dept

We’re back again with another in our weekly reading list posts of books we think our community will find interesting and thought provoking. Once again, buying the book via the Amazon links in this story also helps support Techdirt.

I’m a GDP skeptic. I think it’s a ridiculous concept that is poorly measured and much more meaningless than most people realize. And, I think it can be quite damaging at times too, because we optimize for what we can measure, even if it’s not what we should be optimizing. We see this in so many areas. If there’s a number, our brains seem to turn to mush, even when people say that the numbers aren’t necessarily the most important thing (e.g., look at the way people use “patents” as a measure of how innovative society is — it’s a disease). I’m certainly not alone in being a GDP skeptic either — debates have raged on for years about it in economics and policy circles. A few years back, economists Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi, at the request of then French President Nicolas Sarkozy, published a report which led to a book entitled Mismeasuring Our Lives; Why GDP Doesn’t Add Up, which also digs into the somewhat nutty (and in my mind, equally problematic) concept of “Gross National Happiness” as something of an alternative to GDP.

More recently, economist Diane Coyle published GDP: A Brief but Affectionate History, and the title is pretty accurate. The book is pretty short, and highly readable, and quite interesting. Coyle is somewhat less of a GDP skeptic than I am, and as you can probably guess from the “affectionate” part of the title, more willing to cut GDP some slack as a useful tool — though she seems to be coming around towards the view that it’s potentially outdated, especially as the nature of our economy has moved towards the digital world. Either way, I quite enjoyed it and learned a lot about the history of GDP and some of its more ridiculous and entertaining quirks.

For people who don’t spend much time in macroeconomic circles, or thinking about things like “just how do we measure economic output, productivity or prosperity,” many seem to think that GDP is a much more… credible and meaningful number than it is. And I highly recommend reading both books mentioned here to begin to understand why it’s a lot more problematic than it seems.

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Comments on “Techdirt Reading List: GDP: A Brief But Affectionate History”

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Mattheus (profile) says:

Since my econ days in undergraduate, we all knew GDP was faulty and almost useless as a real measure of productive economic activity. It suffers from the methodological problems of ALL indices (which is the fact that the objects to which they refer are constantly changing – an automobile sold in 1954 is not an automobile being sold today).

Beyond this, what it calculates is totally incomplete. Hiring a housemaid to wash the dishes is counted in GDP, but asking your wife to do the same is not.

Mike Masnick (profile) says:

Re: Re:

whats the unit of measure for this GDP? todays dollars, 2007 dollars, 1933 dollars?? imagine if we had other units of measure prefixed with a year/date. imagine if you had a multi-year project but didnt know what your unit of measure will be in the future.
no wonder things are so fucked up.

That’s not the real issue with GDP. It’s normalized by year, so changes in time aren’t the problem.

Anonymous Coward says:

GDP only measures how often money changes hands.

Self-sufficient rural communal societies, almost by definition, tend to have negligible effect on GPD, regardless of how much they produce, their only ‘official’ income being the amount needed to pay off their property taxes. And if it’s a tax-exempt religious community, its official income (and GDP contribution) can be essentially zero.

On the other side of the coin, it could be argued that the legal industry, despite contributing a sizable chunk of the United States’ GDP, offers no overall productivity gain to American society (many would argue it suppresses actual productivity).

Perhaps the oddest issue with GDP involves warfare. Destroying cities and then rebuilding them to the same as before accomplishes nothing. Except boosting GDP.

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