GDP Fetishism: why GDP is not a good measure of wellbeing

http://www.econlib.org/library/Columns/y2010/HendersonGDP.html#

by yummyfajitas • 16 years ago

17 20 16 years ago

acg• 16 years ago

Reminds me of a speech by Bobby Kennedy:

Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages; the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans.

timr3• 16 years ago

Just in case it isn't clear to everyone (and I don't think it is), this is an opinion piece from a libertarian think-tank, funded by something called "the Liberty Fund". Please don't confuse it with anything related to peer-reviewed economic research.

This is why I hate economics: many of its practitioners have absolutely no ethical qualms about blurring the line between publication of their political opinions and their research. Unless you pay exceedingly close attention to the source and context, you can easily be confused into believing that an editorial is somehow an objective analysis of economic theory. And while I'm sure the author raises a legitimate point about the shortcomings of GDP as a metric, this essay is filled with weak assertions and sloppy logic that probably wouldn't pass muster in a real paper.

yummyfajitas5• 16 years ago

This article is certainly an opinion piece, but the opinion expressed is about economic methodology, not politics.

The main opinion expressed is that economists should measure well being, not GDP. It supports this opinion by giving examples where GDP != wellbeing (man marrying his maid, TSA harassing people, magical productivity increases) and advocating that economists measure wellbeing rather than GDP whenever the two differ.

timr3• 16 years ago

"This article is certainly an opinion piece, but the opinion expressed is about economic methodology, not politics."

Yes, a few of the examples were apolitical (e.g. the man marrying his maid and the economics of slavery), but most were thinly veiled attacks on government programs (e.g. the TSA, government stimulus spending, the cash-for-clunkers program, the dead-weight loss of taxes). The author spends most of his time associating government spending with negative impacts on well-being.

This essay advances a vague, unmeasurable quantity as being of paramount importance, disguises the intent of the essay with a few apolitical examples, then proceeds to argue that a number of recent government initiatives are obviously ill-conceived, in light of their impact on this unmeasurable quantity. As a whole, the essay is little more than an attack on government, framed as an objective discussion of economic methodology.

bokonist2• 16 years ago

Have you read many peer reviewed economics papers? Or even college economics textbooks? They make same arguments about well being, dead weight losses, etc. And they are full of weak assertions and sloppy logic. Peer review can be a process for eliminating error, but it can also be a process for replicating error. Where does your faith in academia economists come from? Have you read a bunch of peer reviewed papers, and decided that they have better logic and reason than the writings of a top econ-blogger ( like Winterspeak ( http://www.winterspeak.com/ )?

Also note that while econlib is funded by the Liberty Fund, most academic economists are substantially funded by the government. There is potential for bias everywhere, let's worry about what people say.

Of course, I also think Henderson is wrong in one of his points. GDP is total national income times a price deflator. If government spending does not result in more productive output, then that will show up in the price deflator, and "real gdp" shouldn't rise. At least in theory. The real problem with the GDP statistics is that the calculation of the price deflator is riddled with methodological problems.

timr3• 16 years ago

"Have you read many peer reviewed economics papers? Or even college economics textbooks? They make same arguments....also note that while econlib is funded by the Liberty Fund, most academic economists are substantially funded by the government. There is potential for bias everywhere."

Economics papers are reviewed by other economists before publication, and government research funding doesn't dictate political ideology. Also, real economics papers aren't opinion pieces, disguised as "articles" in a "library" of economics.

gojomo• 16 years ago

Your critique would be more interesting if you listed the "weak assertions and sloppy logic", rather than impugning the author and publisher.

bengebre• 16 years ago

Hmm. I think a lot of people are aware that GDP has its shortcomings. I think many would embrace a metric that fully captured well-being in an economic manner, but I didn't see the author suggesting any new metric that we should be following instead. I think we use GDP because it's the easiest thing we can use that isn't subject to [much] interpretation. And yes, that sometimes leads to problems.

mark_l_watson• 16 years ago

Everyone knows that GDP is an awful measure of economic health and resiliency. No real news here.

Huricane Katrina? GDP goes up. War? GDP goes up. Banks need bailed out a tax payer expense. GDP goes up.

This might be a close to infinite list, so I'll stop.

What is the GDP good for? Fooling an ignorant population. So, it does have some value to the elites.

jacoblyles2• 16 years ago

If you ever have the choice of living in a country with $1,000 per capita GDP and $10,000 per capita GDP, I suggest you choose the latter (unless, of course, you are there for humanitarian work). That's the difference between Haiti-size earthquakes and Chile-size earthquakes.

pw0ncakes2• 16 years ago

Life is easier in rich countries than in poor ones. Rich countries also have higher GDP. However, the relationship is causative between the wealth and production and higher quality-of-life, not GDP. The arrows go like this: Wealth -> GDP. Wealth -> Well-being. These are tight enough to make it hard for an order-of-magnitude difference (as opposed to, say, 20%) not to denote a better quality of life.

However, the US has a very high GDP and, although it's not Third World yet, has a distinctly lower quality of life than most European countries (expensive healthcare, high educational costs, 1-2 weeks' vacation being considered normal) despite those countries' lower GDPs.

GDP Fetishism: why GDP is not a good measure of wellbeing

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